Entertainment Content Competition
South Korea’s two flagship internet technology companies Naver and Kakao are pushing into the global market in earnest with their entertainment contents, opening a “season 2” of content-centered internet business.
Currently, major entertainment management companies mostly provide entertainment content services in various formats of music, web drama and web movie. In particular, famous and popular celebrities, who lead hallyu (Korean Wave), star in entertainment contents, drawing global attention.
With the capability of platforms owned by Naver and Kakao, the business is more highly likely to succeed in the global market. According to related industry sources on March 19, Naver announced on the 17th that it will invest 100 billion won (US$88.42 million) in YG Entertainment, including the direct investment of 50 billion won (US$44.21 million) in YG Entertainment and the remaining 50 billion won (US$44.21 million) in YG Investment Fund. Through the investment, Naver will secure a 9.14 percent stake in YG Entertainment, becoming the second largest shareholder. YG Entertainment's biggest shareholder is CEO Yang Hyun-suk who holds a 17.62 percent share.
It is believed that Naver made such decision to create a synergy of its entertainment contents and platforms like V Live. Naver V Live, an Internet live broadcast service, recorded 28 million app cumulative downloads in 249 countries around the world as of December last year. The V Live service has 18 million monthly active users (MAU) and 106 million monthly video playbacks.
With the investment in YG Entertainment, Naver will be able to easily secure entertainment contents for its V Live service. In fact, YG Entertainment produces entertainment contents such as web TV show, web drama and web movie. Artists working under YG Entertainment star in the contents. YG Entertainment will also secure a platform to distribute entertainment contents, gaining momentum to tap into the global market.
An official from Naver said, “Hallyu, like K-pop, has spread to entertainment contents, attracting global attention. Naver’s service, which is advancing to a global platform, including V Live, and YG’s professional entertainment contents are expected to create a synergy effect in the global market.”
Kakao already established a foothold to secure entertainment contents last year. The company acquired Loen Entertainment, the operator of the nation's top music streaming service Melon, for 1.87 trillion won (US$1.65 billion) last year. This was part of its strategy to create a synergy effect in the domestic entertainment content sector by combining Kakao Talk, the nation’s top mobile messenger service, and Melon.
Kakao’s takeover of Loen Entertainment led to performance. The company posted 1.46 trillion won (US$1.29 billion) in sales and 116.1 billion won (US$102.65 million) in operating profits last year. Its sales in content platform reached 221.5 billion won (US$195.84 million), up 228.7 percent from a year earlier. This was largely due to the expansion of paying users of Melon service connected with Kakao Talk.
Loen Entertainment has led Kakao’s global expansion. The company’s 1theK is spreading Korean entertainment contents to the world through eight channels, such as YouTube, Facebook and Twitter.
As of December last year, 1theK has cumulative subscribers of 93 million in 231 countries across the world. As Kakao failed to stand out in the global market as Naver did, the company is focusing on expanding the platform of Loen Entertainment.
An official from the industry said, “As domestic entertainment companies are spreading the content business, including music and videos, they are seeking ways to cooperate with platform operators like Naver, Kakao and Google. Entertainment contents are most likely to succeed in the global market among other numerous contents.”