Naver and Kakao continue hunt for exclusive content
Naver and Kakao are increasing investments to secure exclusive content by investing in entertainment companies and acquiring intellectual property (IP).
Last Tuesday, Naver announced it is investing 100 billion won ($84.5 million) in K-pop agency SM Entertainment Group. The investment will go toward SM’s affiliates SMEJ Plus and Mystic Story, as well as a fund jointly created by the two companies. The investment was aimed at boosting cooperation on K-pop video content, after signing an agreement in April to launch the online concert streaming service Beyond Live.
In 2017, Naver became the second largest shareholder of YG Entertainment after investing 100 billion won, half of which went into a joint fund and half on a 9 percent stake in the company. Last June, Naver worked with Big Hit Entertainment to livestream a BTS concert in London.
Kakao M, Kakao Group’s entertainment arm that runs music service Melon, recently acquired three production companies: Story & Pictures Media, Wind Pictures and Logos Film. Since Kakao acquired Melon from SK Telecom in 2018, the internet company has been bringing in in-house content distributors, such as entertainment agencies and production companies.
Netmarble, an online and mobile gaming company, has also been focusing on acquiring and promoting IP. The company has been selling merchandise from its top-rated games, such as Seven Knights and StoneAge World. Recently, the company acquired Keyring, an animation and advertising company.
Content IP is at the center of Naver and Kakao’s strategy to expand in the international market as well. In the 2000s, the companies grew as PC-based portal services, and in the 2010s they focused on expanding their mobile platforms. In 2020, both became conglomerates that rank within the top 10 for market capitalization on the Kospi. The internet companies have been acquiring content for their own mobile platforms to boost profits in the global market.
Naver and Kakao’s initial stage of developing messaging apps and portal sites for PC and mobile were moves to strengthen their platforms, so that they could attract both users and partner companies.
Now, instead of partnerships, these firms are handpicking companies to combine with via mergers and acquisitions. Naver directly invests in entertainment companies that are performing well in K-pop and acquires their shares.
Kakao has been creating a system and environment for producing, selling and distributing K-drama and movies. Its traditional business model sells the copyright of successful webtoons to broadcasting or production companies and shares profits with them, but the latest model leans toward creating its own content with IP and taking all the profits.
While fostering their own content business ecosystem, IT companies have been able to capitalize on the competitive edge of the Korean entertainment business. The popularity of BTS, for example, was instrumental in reaping 26 billion won in revenue during its 90-minute online concert in June.
Korean games and webtoons are also faring well abroad. As much as 71 percent of Netmarble’s sales during the first quarter were overseas sales. Naver’s Line Webtoon has been successful in the United States, and Kakao’s Piccoma hit number one in terms of monthly sales in July in Apple’s App Store and Google Play in the combined charts excluding games, outperforming Line Manga for the first time since its launch in 2016.
“IT companies that started with portal business have experience with failure overseas, and hence they have developed a sense of what type of content works and does not work abroad,” said Choi Jae-hong, a multimedia engineering professor at Gangneung-Wonju National University. “Previously, there was pressure to absolutely cater to the qualities of the countries companies are exporting their services to, but now content produced in Korea can still do well in the global market while maintaining its quirks.”
BY HA SUN-YOUNG, LEE JEE-YOUNG [firstname.lastname@example.org]