Kakao Entertainment to merge with music streaming platform Melon

Kakao Entertainment announced Thursday that it has decided to merge with South Korea’s leading online music streaming platform, Melon.

The decision comes as Kakao aims to secure competitiveness and leadership in the showbiz industry.

The two companies jointly agreed at a board meeting held Thursday and attended by both sides. The deal is expected to be finalized through a shareholders meeting on Sept. 1.

Under the merger, one share of Kakao will be exchanged with around 7.8 shares of Melon.

The local music provider will rebrand itself as “Melon M.” Lee Jae-wook, who in 2018 had served as the chief of Kakao M, a subsidiary of Kakao, is expected to lead the nation‘s new music giant.

Kakao expects to see some 2 trillion won ($1.75 billion) in annual sales after acquiring the nation’s biggest music platform. The two companies will maximize synergy by eyeing the domestic and international markets, respectively. The two also plan to augment their business portfolio and stand at the forefront of the music industry by providing a wide range of services and content for global users, according to the press release .

Kakao has completed its “value chain” puzzle by adding the music distribution application to its already expansive business portfolio. Moreover, the company expects the merger to be a stepping-stone to becoming a leading corporation.

Melon was established under SK Telecom, the nation‘s largest wireless carrier, in 2004 and was sold to a Hong Kong-based private equity firm in 2013. It was later acquired by Kakao in 2016 and was part of Kakao M until September 2018. Kakao M eventually spun-off from Kakao, but Melon stayed, as the paid service operation helped Kakao’s cash flow.

The streaming service currently boasts 33 million users and around 5 million paying users. It also hosts one of the biggest awards shows for K-pop buffs, the Melon Music Awards, and provides audio content for avid music listeners.

By Park Jun-hee (junheee@heraldcorp.com)