Naver likely to invest near $83.5 million into SM Entertainment to secure K-pop content

  • 2020-07-21

Korea’s platform giant Naver is in talks with SM Entertainment, Korea’s largest entertainment company, to acquire shares worth approximately 100 billion won ($83.5 million) in a move to secure Korean pop (K-pop) content, according to financial industry sources.

The final amount has yet to be confirmed, but the market is predicting it to be around 100 billion won which would make Naver the second-largest shareholder with nearly a 12.64% stake if the deal goes through. Soo-Man Lee, the chief executive officer, is the largest shareholder with an 18.73% stake.

Naver’s decision to invest in SM may be fueled by the need to expand its intellectual property content and to aggressively tap into the global content market. The two companies signed an MOU earlier in April to collaborate on global businesses, according to an industry source.

The global pandemic has provided fresh business opportunities for platform companies prompted by prolonged social distancing and non-contact circumstances.

Naver is interested in providing content such as paid online concerts, performances, and live streaming on its platform. The company is targeting the global market which makes it even more important to collaborate with SM since the entertainment company has a successful track record of kicking off the initial Korean Wave (hallyu – global popularity of Korean culture) with in-house artists such as BoA and Super Junior.

“Earlier in April, popular Korean boyband BTS held an online concert on Youtube instead of their usual streaming platform VLive on Naver. The concert raised over 25 billion won in ticket sales and attracted 756,600 viewers,” said an entertainment industry analyst.

“It probably stung Naver to miss out on a chance to have BTS concert on its platform,” the analyst added explaining that it may have triggered Naver to step up their game in securing globally attractive content for its platform.

SM Entertainment, founded in 1995, is the largest entertainment company in Korea. It manages popular singers including BoA, Red Velvet, Super Junior, EXO, Girls’ Generation, and NCT as well as actors, athletes, and models. In 2019, the company posted 657.8 billion won in turnover and 40.3 billion won in operating profits.

Naver’s foray into the entertainment industry is not new. In 2017, Naver invested 100 billion won in YG Entertainment, one of the top three Korean entertainments in charge of Big Bang, BlackPink, and iKON among others. The IT giant is the second-largest shareholder with a 9.13% stake.

There have been increased cases of online platforms and entertainment companies working together as K-pop’s global presence continues to flourish. In 2016, Kakao, the country’s biggest mobile messaging app operator, acquired Loen Entertainment which owned Melon, Korea’s largest streaming music service.

Following the acquisition, Kakao launched an entertainment affiliate named KakaoM which manages music labels, singers, actors, and entertainment content. Kakao plans to release a video platform via its messaging app service KakaoTalk this year, which will offer content using KakaoM’s intellectual property.

“The global coronavirus pandemic has put a stop to worldwide tours and performances which have been vital to entertainment companies. We’re going to see many platforms seeking opportunities to collaborate with entertainment companies,” a source from the entertainment industry said.

 

By Bumjin Chun

forward@hankyung.com

<Edited by Danbee Lee>