In South Korea, Kakao, local king of the Web, unveils global ambitions and seeks to acquire a nugget of K-pop


K-pop fan before a concert in Jakarta (Indonesia), March 12, 2023.

Business, stars, and family psychodrama… The takeover of SM Entertainment has the whole of South Korea in suspense, even going so far as to provoke the start of stock market speculation. The values ​​of the “content production” sector have indeed increased by 14% since the beginning of the year on the Seoul Stock Exchange. An attractiveness largely due to the battle between Kakao, a tech and Web giant, and the K-pop agency Hybe for control of another K-pop agency, SM Entertainment.

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Hybe, at the origin of the group BTS, opened hostilities in February with an offer on the managing agency Girls’Generation, Red Velvet or even EXO, in order to raise its stake to 25% of the group.

Kakao, and its subsidiary specializing in content Kakao Entertainment, responded on March 7 by announcing that they wanted to take over 40% of the agency. And Hybe could go one better. The case is fascinating because it also opposes the founder of SM Entertainment, Lee Soo-man, favorable to Hybe, and his nephew Chris Lee, current CEO of the agency, who favors Kakao. The confrontation is such that Chris Lee released a video in which he accuses his uncle of tax evasion.

The enthusiasm for SM also reflects the financial interest in K-pop, “one of the fastest growing industries, with some of the most engaged and spending fans”observes Helena Kosinski, vice-president of the music data specialist Luminate, on the specialized site Quartz. In the United States, K-pop saw its streaming listening jump by 51% between 2019 and 2021, while the American market grew by only 32%.

Instant messaging

For Hybe, who takes the risk of being challenged by the Financial Supervision Agency because of a possible monopoly situation, it is a question of diversifying its sources of income, which are too dependent on BTS, on hiatus until 2025 because of the compulsory military service of its members.

Kakao wants on his side “to create important synergies to strengthen the competitiveness and presence of Korean culture at the global level”. If successful, the operation would “South Korea’s only world-class entertainment company”said Kim Hyun-yong, analyst at Hyundai Motor Securities.

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Founded in 2006 by Kim Beom-soo, Kakao has established itself in South Korea thanks to a wide range of services, added to the instant messaging service KakaoTalk, launched in 2010 and now installed on more than 90% of local smartphones. The company also owns Daum, Naver’s navigator rival, and its popular taxi booking service, Kakao Taxi. It was the first to create an online bank, Kakao Bank, launched in 2017.

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