SM Targets Kakao as Competitor, Aggressively Investing in IT

'Culture Technology.' This is the vision put forth by SM Entertainment (SM), which is at the center of a management rights dispute. The company dreams of evolving beyond being just an idol training entertainment agency to becoming a digital content production and distribution company. Early on, SM combined its powerful intellectual property (IP) with IT, breaking down the boundaries between the entertainment and IT industries. This is the main reason why IT giant Kakao and entertainment giant HYBE are targeting SM.

From Metaverse to AI... Discovering Content through IT

SM is the fastest among entertainment companies to arm itself with information technology (IT). In 2012, it introduced the virtual nation 'SM Town,' and in 2021, it evolved this into the metaverse (extended virtual world) called 'SM Culture Universe.' It operates 11 platforms directly, including fan service apps, merchandise sales apps, and augmented reality (AR) content apps. SM attracts fans worldwide who used to access SM idols through YouTube and Facebook to its own platforms, providing digital content.

The fusion of IT and content has produced unprecedented new services. In 2020, SM launched the metaverse girl group 'aespa' and will soon introduce the virtual idol 'Naibis,' based on their universe. They have mobilized IT technologies such as artificial intelligence (AI), 3D graphics, and voice synthesis. To this end, last year they established the metaverse content production company 'Studio Gwangya' and the virtual reality (VR) content production company 'Studio A.'

SM has concentrated its IT capabilities in its IT affiliate DearU. After increasing internal IT personnel, it established the IT specialist company EverySing in 2017. This company merged with mobile messenger developer Brinicle to become DearU. After going public in 2021, DearU's market capitalization exceeded 1 trillion won, making it a core affiliate of SM. Even before listing, DearU identified Kakao as the only comparable company for valuation, excluding entertainment companies. Its core business is 'DearU Bubble,' a 1:1 messenger service where fans and artists communicate, similar to KakaoTalk. It sends messages to 1.7 million subscribers worldwide and provides real-time video streaming services. Most of its 74 employees are IT personnel, with 30% dedicated to research and development (R&D).

An industry insider said, "Using powerful content resources from entertainment companies to operate platform services has become a necessity, not a choice. IT technology enables entertainment companies to transcend content genres and service time and space, making it possible to create new products and markets."

300 Billion Won Investment in IT... Launching a Super App

Recently, SM announced its business plan 'SM 3.0' and declared it will invest 1 trillion won by 2025. Of this, 30%, or 300 billion won, will be invested in IT, including platform advancement and the metaverse. The plan is to consolidate community, commerce, and content services, which are currently spread across 11 apps, into a single platform. SM will directly operate this integrated platform, demonstrating confidence in its IT capabilities to run a super app. In the metaverse sector, SM plans to establish a joint venture (JV) with a virtual human technology company. It also announced investments in visual effects (VFX) and AI audio technology companies to realize the image and voice of virtual world artists. Park Jun-young, an internal director at SM, emphasized, "As the overvalued IT company valuations stabilize, investment opportunities are increasing. Going forward, those who add technological capabilities to provide differentiated experiences will establish themselves as game changers."

SM is also investing in IT personnel. Following the recent establishment of the Video IP Business Center, it plans to recruit data analysis personnel. The Video IP Business Center is an organization that distributes IP across various channels and monetizes through advertising and commerce. Data analysts will use data generated from the integrated platform to create new business models.

SM has been steadily recruiting executives from IT companies. A representative example is Hong Gil-hwa, Director of Human Resources Support, who was recruited from NHN in 2021. He previously served as Chief Human Resources Officer (CHO) at e-commerce company AcomMate and Director of Human Resources Support at NHN Godo (now NHN Commerce). SM created a new executive position solely for HR duties when recruiting him and has accelerated the recruitment of IT talent. Yook Kyung-sun, Director of the MBN (Metaverse, Blockchain, NFT) Business Office, who joined SM last year, is an expert in blockchain and non-fungible tokens (NFTs). She previously led Creamarket, which sells popular YouTubers' merchandise, and Loudly, which converts creators' IP into NFTs. CEO Ahn Jong-oh, who leads DearU, is a founder of software (SW) developer Infraware and has experience managing business after acquiring AI company Selvas AI.

This content was produced with the assistance of AI translation services.