A seismic shift may be in store for the local entertainment industry after tech giant Kakao’s entrance to the market, upon its acquisition of Loen Entertainment, the operator of MelOn, Korea’s top music-streaming service.

The big buy, which gives the maker of mobile messenger KakaoTalk a 76.4 percent stake in Loen worth 1.87 trillion won ($1.55 billion) later this month, could open a greater platform for the company to create new music services, on top of access to Loen’s plethora of entertainment content.


MelOn is already the country’s No. 1 online music-streaming site, controlling about 50 percent of the market with roughly 28 million subscribers, including approximately 3.6 million paid subscribers. The acquisition announced Monday by Kakao, which has roughly 150 million users worldwide, is projected to further increase MelOn’s music streaming monopoly.

“Once MelOn, which has a market share of more than 50 percent, combines with Kakao’s platform and capital, its monopoly in the music streaming industry will be stabilized and it would be hard for rival music sites to compete,” said one music website employee.   

The music industry here has already been strongly criticized for bifurcating the country’s music content into K-pop music and non-K-pop music, and some music insiders view the acquisition as potentially making it even more difficult for non-K-pop artists, or small-time pop music agencies, to penetrate the market with independent content.

“When big conglomerates are in charge of distributing content and even control the production platforms of musicians, it will inevitably lead to a big shift in synergy,” a representative of a midsize entertainment agency was reported telling a local news outlet.

“This makes it nearly impossible for a company like us to grow and establish content independently, unless we move to a big-time music label.”

By combining forces, Kakao and MelOn are expected to ride K-pop’s popularity in the broader Asian market to further expand and strengthen Kakao’s presence overseas.

“Music is one of the most loved content genres in the mobile era,” said Kakao CEO Jimmy Rim on Monday. “It is also incredibly powerful in that one song can set trends for an entire generation and highly influence global pop culture,”

“By combining Kakao’s various platforms and content services and Loen’s leading music content, we expect tremendous synergy that could establish a strong foundation for global expansion,” he added, noting his vision that this new partnership with MelOn would forge the needed momentum for Kakao’s global debut.

However, aside from dominating online streaming in Korea, Loen Entertainment is also the country’s No. 1 record distribution label and leading managing agency to a number of big-name K-pop acts, on-screen stars, writers and producers.

The company’s Loen Tree agency is home to popular K-pop starlet IU, while its Starship Entertainment is home to music heavyweights Sistar and K.Will as well as idol boy band Boyfriend.

Late last year Loen also became the majority shareholder of A Cube Entertainment, buying a 70 percent stake in the company. A Cube is home to Apink and singer Huhgak, and is a subsidiary of Cube Entertainment, one of the country’s biggest K-pop agencies, which manages some of the industry’s top-name acts, including 4minute and Beast.

In 2013, Kakao made its first foray into the local music market by launching its social networking music service KakaoMusic in collaboration with Bugs Corp. -- Korea’s No. 4 music-streaming site. Following Monday’s announcement, it was revealed that that service will continue after the merger, although many industry insiders remain skeptical as to its continued operations.

Along with its ventures in the music market, Kakao has established many platforms in the communications and entertainment fields, including KakaoTV, a video sharing platform that offers free Web dramas and video-on-demand movies and that also allows users to watch clips with friends.

Kakao announced that the initial plan for its music industry endeavors is to fuel demand by adding to existing services and create new music services incorporating social networking platforms.

By Julie Jackson (juliejackson@heraldcorp.com)