CJ ENM, SK Square invest $179 mn in Wavve ahead of merger with TVing

South Korean entertainment powerhouse CJ ENM Co. and SK Group’s investment arm SK Square Co. have invested a combined 250 billion won ($179 million) in Wavve, an over-the-top (OTT) streaming platform operated by Korea’s top mobile carrier SK Telecom Co.

Analysts said the move is part of the two firms’ strategic plan to accelerate a planned merger of CJ ENM’s TVing, the largest domestic OTT service provider, with Wavve, the No. 3 local OTT, to challenge bigger rivals such as Netflix Inc.

Through their regulatory filings on Wednesday, SK Square and CJ ENM said they have invested 150 billion won and 100 billion won in Wavve, respectively.

The investment will be made so that the two companies acquire newly issued convertible bonds from Wavve.

CJ ENM is TVing's largest shareholder with a 48.9% stake. SK Square is the largest shareholder in Wavve with a 40.5% stake.

Industry officials said CJ ENM will have management rights over the merged entity when TVing and Wavve successfully complete the merger process.

KOREA, OTT BATTLEGROUND

The anticipated merger comes as Korea rapidly emerges as a battleground for domestic and global OTT players to secure content, as locally produced TV series and dramas have become global hits.

In Korea, Netflix Inc. is the dominant player whose viewership growth has exceeded that of its competitors thanks to a string of popular releases like Squid Game.

As of October, Netflix had a subscriber base of 11.9 million monthly active users in Korea. TVing had 8.1 million users, while Wavve had 4.2 million users.

When the two Korean OTT operators merge, their combined subscriber base will reach 12.3 million people, making the merged entity the largest on-demand video streaming service in the country.

SK Square and CJ ENM aim to finalize their OTT merger plan, have it reviewed by the Fair Trade Commission and launch the merged entity within the first half of next year.

“Through our strategic joint investment, we will strengthen synergy between TVing and Wavve and accelerate their full integration,” said SK Square Chief Executive Han Myung-jin.

Yoon Sang-hyun, CEO of CJ ENM, said: “This investment enables cooperation in various areas, such as enhancing user convenience and content supply. We expect this move to improve our user satisfaction and enhance the competitiveness of local OTT platforms.”

MONEY LOSERS FOR YEARS

Industry watchers said the merger could help TVing and Wavve to stage a turnaround after having posted losses for years.

Last year, TVing and Wavve posted operating losses of 142 billion won and 79.1 billion won, respectively.

CJ ENM has been spending heavily to pursue acquisitions in Korea and abroad in order to capitalize on the global success of K-content ranging from TV series and movies to pop music groups.

CJ ENM runs some 16 cable TV channels, including drama channel tvN and music channel Mnet as well as the OTT platform TVing. CJ, the producer of the Oscar-winning film Parasite, also operates film production companies such as Studio Dragon Corp.

Write to Ji-Eun Jeong at jeong@hankyung.com
In-Soo Nam edited this article.