As Kakao and Kakao M merge, synergies between the two platforms, Kakaotalk and Melon, are expected. Kakao and Kakao M announced on the 17th that they made such decision through their respective board meetings.
Kakao M is a subsidiary of Kakao, which operates the largest music service ‘Melon’ in Korea. Kakao M, formerly operated as Loen Entertainment, which included Korean pop singers like IU, was acquired by Kakao in March 2016 for 11.7 billion USD.
The merger will be finalized on September 1st after final approval of the merger at the shareholders’ meeting on July 5th. “The combination of KakaoTalk and Melon will create a new experience in music consumption,” said Cho Soo-yong, co-president of Kakao.
Co-president Cho further added by saying, “The purpose of this merger is to focus on nurturing platforms and contents according to platforms.” Kakao is expected to absorb the platform of Kakao M, including Melon, but will launch the content business such as music and video as a separate corporation.
Kakao M is also in charge of the music video business, which will be injected after the merger. This reflects the industry situation in which competition in the video production and distribution market is intensifying, and it is a measure for quick decision making structure and convenience of attracting foreign investment.
“As Youtube, Spotify, and Apple music are increasing their market share, the merger is aimed at protecting the music source market,” said an official of Kakao. “Music needs to be combined with a bigger Kakao platform while content needs to be expanded into a business that encompasses music and video,” said Kakao M CEO Lee Jae-wook.
With about 4.6 million users currently using melon music service, Kakao M is the industry leader in paid membership and performance. With the merger ofKakaoTalk and Melon services, their influence as platforms is expected to increase.
Meanwhile, Kakao M’s video business division is said to be a long-term initiative of Kakao to grow into a core subsidiary in charge of global IP (Intellectual Property rights) and content through more aggressive investment and mergers and acquisitions.