[K Changers]⑥ Kakao Entertainment Steps Closer to 'Beyond Korea'

Recently, Kakao Entertainment, a company at the forefront of K-content, welcomed Netflix's surprise announcement to invest 3.3 trillion KRW in domestic content. Among the six Korean works that ranked first in weekly non-English viewing hours on Netflix last year, three were produced by Kakao Entertainment: Suriname, Business Proposal, and Money Heist: Korea ? Joint Economic Area.

Park Seo-joon and Han So-hee star in Kyungsung Creature, the most anticipated work of the second half of this year (Photo by Netflix)

원본보기 아이콘

Kakao Entertainment is the only comprehensive content company in Korea that encompasses story (webtoons, web novels), music (artist planning and actor management, music distribution), and media (drama, film, variety show production). Last year, its revenue was 1.8647 trillion KRW. Although the media division had the smallest revenue among the three sectors (412.3 billion KRW), it recorded the highest growth rate (47%) compared to the previous year. This year, it plans to produce about 30 films and dramas, double the 15 produced last year, so higher revenue is expected.

Kakao Entertainment is the spearhead of the Kakao community’s ‘Beyond Korea’ strategy, which aims to increase Kakao’s overseas sales ratio to 30% by 2025 (up from 19.7% last year). Last year, Kakao’s overseas sales amounted to 1.3987 trillion KRW, of which 466.1 billion KRW (33%) came from Kakao Entertainment. Earlier this year, Kakao Entertainment also attracted investments worth about 1.2 trillion KRW from overseas sovereign wealth funds, including those from Saudi Arabia and Singapore.

The media division of Kakao Entertainment began its full-fledged growth after Kim Sung-soo took office as co-CEO in 2019. As the company expanded and its results became visible, it grew to rival established media giants like Studio Dragon and SLL JoongAng in scale. The driving forces behind this reorganization into a ‘big three’ system, starting as a latecomer, were CEO Kim’s leadership and the establishment of an intellectual property (IP) value chain centered on a multi-studio system.

Kim Sung-soo, Co-CEO of Kakao Entertainment (Photo by Kakao Entertainment)

원본보기 아이콘

CEO Kim is known as the ‘Midas Touch’ of the media industry. Having served as chairman of Kakao’s board, he also leads the Community Alignment Center (CAC), Kakao’s control tower. Over 30 years, he has built a success story as CEO of On-Media and CJ ENM. During his tenure at On-Media, he launched hit channels such as OnGameNet, OnStyle, and Super Action, making it the number one cable operator. While leading CJ ENM, he produced variety shows and dramas that rivaled terrestrial broadcasters, including the Reply series, Misaeng, Three Meals a Day, and Superstar K, mainly on the tvN channel. Studio Dragon, a CJ ENM subsidiary and currently the industry leader, was also his creation.

Since CEO Kim moved to Kakao Entertainment four years ago, the media division has rapidly grown. Under his philosophy that ‘people are the greatest asset,’ the company expanded through production company M&A. Currently, it has nine drama and film production subsidiaries. In this process, Kim’s decades-long network also played a crucial role. A representative example is the film company ‘Sanai Pictures.’

Sanai Pictures, known for films like New World and Asura, faced uncertainty in production after its parent company encountered a management crisis in 2019. At that time, Kakao Entertainment acquired Sanai Pictures. CEO Han Jae-deok of Sanai Pictures had a personal connection with CEO Kim. Under Kakao Entertainment’s umbrella, an environment was created where the company could focus solely on production, leading to the creation of Hunt. This film, directed by Lee Jung-jae in his directorial debut, was invited to the Cannes Film Festival and sold to 144 countries.

원본보기 아이콘

Kakao Entertainment did not stop at building a multi-studio system in scale. The biggest difference from competitors is that it creates synergy by utilizing its own intellectual property (IP) across webtoons, web novels, and artist and celebrity management, often co-producing projects. It owns about 10,000 webtoons and web novels, 70,000 songs, labels (record planning companies) with artists like IVE and IU, and management agencies representing actors such as Lee Byung-hun, Gong Yoo, Park Seo-joon, and Yoo Jae-suk. All of these are assets available for Kakao Entertainment’s use.

For example, Business Proposal started as a web novel, then was adapted into a webtoon and a drama. Kakao Entertainment owned the original web novel IP, and the webtoon adaptation was serialized on Kakao Webtoon. Based on the original work, the subsidiary production company Cross Pictures co-produced the drama. The subsidiary label and its artists participated in producing the OST. When the drama became a hit, interest shifted back to the webtoon and web novel.

The highly anticipated drama Gyeongseong Creature, expected to be the biggest hit in the second half of this year, follows a similar model. The scenario was written by Kang Eun-kyung, a writer from the subsidiary creator group ‘Gline.’ The subsidiary production company Glen & Grim Media is producing it, with Kakao Entertainment co-producing. Actor Park Seo-joon, from the subsidiary management company Awesome ENT, stars in the lead role. Even before the release of season 1, season 2 production has already been confirmed, reflecting high expectations.

Suriname aired last year (Photo by Netflix)

원본보기 아이콘

Kakao Entertainment, which caused a stir in the market seven years ago by acquiring Melon, made another bold move by acquiring SM Entertainment last March. While strengthening K-pop capabilities centered on the music division, synergy effects with the media division are also expected. SM artists can appear in Kakao Entertainment-produced dramas and participate in OST production. Webtoons or web novels featuring SM artists may be created, which can then be adapted into dramas. In particular, SM owns globally popular IPs such as NCT, EXO, and aespa, which is expected to aid global expansion.

In the securities industry, the acquisition of SM is seen as strengthening the value chain created by Kakao Entertainment’s diverse IPs. Hyun-yong Kim, a researcher at Hyundai Motor Securities, said, “Webtoons, K-pop, and dramas are all accelerating their global expansion,” adding, “A comprehensive entertainment company has emerged with 35% of revenue from webtoons, 30% from K-pop, 20% from dramas, and 15% from Melon.” There is also an assessment that the company is one step closer to an initial public offering (IPO), which was previously estimated to be worth 20 trillion KRW.

Jang Se-jung, head of Kakao Entertainment’s video business division, said, “This year, we will focus on diversifying premium content IP targeting the global market to further solidify our position as a leading global multi-studio for K-content.” She explained, “We will continue to captivate audiences worldwide by showcasing works infused with ‘creative DNA’ through collaboration synergies with subsidiaries that have creative production capabilities and strong partnerships with global partners.”

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.