New Business Areas
A number of high-profile mergers and acquisition (M&A) deals were made in the entertainment industry recently. Kakao and HYBE's investment in SM Entertainment is a recent good example.
Korean showbusiness companies are partnering with blockchain platforms for metaverse platforms or the non-fungible token (NFT) business. HYBE and YG Entertainment have invested in Lambda256, a Korean blockchain platform developer, last year. The entertainment companies are actively investing in a Web 3.0 ecosystem where various performances and events can be held, industry observers say. Moreover, they are diversifying their business models by making a foray into the game industry and the online community platform business. They are also eyeing merger opportunities in newly formed markets such as investment in part of music copyrights.
Video content companies are also actively utilizing M&As in order to acquire quality content and ramp up their subscriber numbers. In the United States, Disney acquired 21st Century Fox and Amazon took over MGM. In the global market, the race is on to acquire comprehensive content production companies. Korean over the top (OTT) platform TVing has also absorbed and merged with KT Seezn, and content production companies such as Studio Dragon and SLL JoongAng are investing in production companies with successful content creation experience.
Cross-border M&As among contents companies may be made in the future. As video viewing platforms have gone online, it has become easier for content to go international. Programs such as “The Glorious” and “Physical 100” have gained big popularity not only in Korea but abroad.
Global M&As are already active in the webtoon and web novel industry. Kakao Entertainment has aggressively acquired US webtoon and web novel platforms -- Usia World, Tapas, and Radish. Naver Webtoon also acquired North American web novel platform Whttpad. Content companies are prioritizing webtoon and web novel platforms with competitive content IP and writers to strengthen their story capabilities. Content IPs based on webtoons and web novels are becoming a major target in the M&A market as they can be expanded into dramas, movies, and games. Last year's hit JTBC TV show “Reborn Rich” is also based on a web novel.
In addition to the recent artificial intelligence (AI) craze in society as a whole, investments are being made also in AI technology in the webtoon and web novel industry. In August 2018, Kakao Entertainment introduced a preference-based content recommendation service by acquiring a stake in Mycelebs, a Korean startup specializing in AI curator services. In December 2019, Naver Webtoon acquired AI technology company V.DO and is continuing its AI research by establishing a dedicated AI team within the organization. A faster pace of AI technology advancement in the future is expected to accelerate innovation across content ecosystems including content creation and distribution.
Game companies are making good use of M&As in order to acquire new technologies to better respond to changing trends. Recently, of note are M&A attempts to develop new growth engines such as streaming game platforms utilizing cloud technology, VR game devices, and content development utilizing the metaverse and VR technology. Korean companies are expanding into the content business such as with NFTs and digital humans by utilizing IP acquired through partnerships with entertainment companies.
Game companies are also looking for business opportunities based on new technologies such as cloud and the metaverse. Game console developers such as Microsoft (Xbox), Sony (PlayStation), and Nintendo (Nintendo Switch) have been acquiring game content companies in order to take the lead in the platform competition utilizing their game consoles. Microsoft's acquisition of Activision Blizzard and Sony's acquisition of Bungie are some of the recent big M&As involving game developers. These companies have chosen M&As to offer a variety of games to attract users and keep them on their platforms.