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Jack Lee, wangjb77@gmail.com 

Kakao, South Korea's largest Internet platform company, has become the second-largest shareholder by investing KRW 217.1 billion in SM Entertainment, the main player in creating K-Pop myths.

KaKaO is Korea's largest big tech company with a variety of business chains covering PC and mobile, including games (Kakao Games), entertainment (Kakao Entertainment), payment (Kakao Pay), internet bank (Kakao Bank), and portal site (daum.net). In particular, KakaoTalk is a representative SNS platform used by most Koreans.

SM is Korea's largest entertainment agency recognized by others who have long led the Korean music market and produced numerous K-PoP superstars.

▲Kakao Talk's signature character in the Kakao office stands out. / Courtesy of KaKaO

Many K-Pop stars, including HOT, Super Junior, Girls' Generation, SHINee, EXO, Red Velvet, NCT127, NCT Dream, and WayV, are SM's singers. In addition to singers, top Korean actors, comedians, models, and sports stars belong to SM.

The reason why KaKaO recently signed a strategic partnership through the acquisition of SM's stake is that it is an exquisite combination of a huge content distribution company and a large entertainment agency.

KaKaO has long been embroiled in rumors that it is trying to acquire SM to strengthen its content business. Instead of KaKaO acquiring SM's management rights, it turned to maximizing synergy by combining the business networks of the two companies through strategic equity investments.

Accordingly, KaKaO has signed a three-way strategic business agreement with its entertainment affiliate Kakao Entertainment and SM, and plans to actively promote joint cooperation projects related to K-Pop in the future.

▲There are many K-Pop superstars among SM singers. / Captyred by SM's official YouTube channel

These companies plan to jointly promote global management businesses using networks such as overseas partners of each company, while cooperating with each other to jointly discover and nurture K-pop artists through global auditions.

These companies also plan to gradually expand their collaboration fields to various businesses, starting with music businesses such as the production and distribution of global records and music sources. Among them, future businesses that utilize technology capabilities such as AI possessed by Kakao are also included.

In addition, KaKaO plans to contribute to the development of Korea's performance culture ecosystem by utilizing the complex cultural facility "Seoul Arena", which is scheduled to be established in Chang-dong, Dobong-gu, Seoul.

Bae Jae-hyun, CEO of Kakao, said, "we expect that it will jointly respond with SM to the competition in the global music and content market, which is getting fiercer, and it will be a great help to each other in targeting the global main stream of K-content. We will contribute to expanding the global influence of K-Culture through multilateral cooperation in the future."

SM's managers also said, "through this strategic alliance, SM has secured a strong growth engine to develop into a leading global entertainment company."

▲Lee Soo-man, former executive producer and founder of SM Entertainment. / Courtesy of SM Entertainment
SM plans to make aggressive investments such as expanding global music publishing and acquiring labels at home and abroad to promote the company's future vision, SM 3.0, with funds raised through KaKaO this time.

Korean experts say, "the signing of a strategic partnership between KaKa and SM will serve as an opportunity to further revitalize the expansion of K-content such as K-Pop and K-drama and its entry into the global market."