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Recently, there have been many high-profile M&A transactions in the entertainment industry. Kakao and HYBE’s investment in SM Entertainment is a good recent example.
Korean entertainment companies are partnering with Metaverse Platforms or blockchain platforms for non-fungible token (NFT) businesses. HYBE and YG Entertainment invested in South Korean blockchain platform developer Lambda256 last year. Industry watchers say entertainment companies are investing aggressively in the Web 3.0 ecosystem that hosts a variety of shows and events. In addition, they are diversifying their business models by entering the game industry and online community platform business. They are also paying attention to merger and acquisition opportunities in emerging markets, such as investing in some music copyrights.
Video content companies are also actively using mergers and acquisitions to acquire premium content and increase subscriber numbers. In the US, Disney bought 21st Century Fox and Amazon bought MGM. In the global market, there is a competition to acquire comprehensive content production companies. Korean OTT platform TVing has also absorbed KT Seezn, and content production companies such as Studio Dragon and SLL JoongAng are investing in production companies with successful content creation experience.
There may be cross-border mergers and acquisitions between content companies in the future. With the launch of video viewing platforms, it has become easier for content to go international. Programs such as “The Glorious” and “Physical 100” are popular not only in Korea but also abroad.
Global mergers and acquisitions are already active in the web comic and web novel industry. Kakao Entertainment has made a big acquisition of US webcomic and web novel platforms – Usia World, Tapas and Radish. Naver Webtoon has also acquired North American online novel platform Whttpad. Content companies are prioritizing webtoon and webnovel platforms with competitive content IP and writers to enhance their storytelling capabilities. Content IPs based on web comics and web novels are becoming prime targets in the M&A market as they can expand into dramas, movies and games. Last year’s hit JTBC TV show “Rebirth to Wealth” was also based on a web novel.
In addition to the recent boom in artificial intelligence (AI) across society, the web comics and web novel industries are also investing in AI technology. In August 2018, Kakao Entertainment launched a preference-based content recommendation service by acquiring a stake in Korean startup Mycelebs, which specializes in AI curator services. In December 2019, Naver Webtoon acquired AI technology company V.DO and continued its AI research by establishing a dedicated AI team within the organization. The faster pace of advances in AI technology in the future is expected to accelerate innovation in the content ecosystem, including content creation and distribution.
Gaming companies are using mergers and acquisitions to gain access to new technologies to better respond to changing trends. More recently, it has been notable for M&A attempts to develop new growth engines, such as streaming gaming platforms utilizing cloud technology, VR gaming devices, and content development leveraging metaverse and VR technologies. South Korean companies are expanding into content businesses such as NFTs and digital humans, using intellectual property acquired through partnerships with entertainment companies.
Gaming companies are also looking for business opportunities based on new technologies such as cloud and metaverse. Game console developers such as Microsoft (Xbox), Sony (PlayStation) and Nintendo Switch (Nintendo Switch) have been buying game content companies to use their consoles to gain a leading position in the platform competition. Microsoft’s acquisition of Activision Blizzard and Sony’s acquisition of Bungie are some of the latest large mergers and acquisitions involving game developers. These companies opt for mergers and acquisitions to offer a variety of games to attract users and keep them on their platforms.
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