Kakao Corp., South Korea’s largest messaging service operator, revealed that it would enter the over-the-top (OTT) streaming sector. Investment banking sources stated that Kakao Entertainment Corp., Kakao’s media content provider unit, spent 25 billion won ($22.3 million) to obtain a 100% in INISOFT Co.
Founded in 2001, INISOFT is a DRM-protected (digital rights management) media streaming platform operator. In 2009, it developed Dice Player, an Android-optimized media player software. In addition to specializing in video streaming service support, INISOFT holds an extensive track record with international telecommunication companies and OTT providers.
Some of INISOFT’s international clients include Japan’s NTT Plala and Tsutaya TV, Taiwan’s Taiwan Mobile, and the US’s HBO and Microsoft. Meanwhile, the company’s South Korean clients include CJ ENM and SK Broadband.
2022 IPO Preparation
Kakao Entertainment’s INISOFT acquisition signifies its first step in establishing an OTT service platform. Industry sources also said that Kakao Entertainment plans to launch an OTT service by 2022. Additionally, Kakao Entertainment aims to file for an initial public offering (IPO) sometime next year.
As part of its 2022 IPO target, the company has been boosting and expanding its business portfolio. For instance, Kakao Entertainment finalized its Radish Fiction and Tapas Media acquisition to strengthen its footing in North America. Recently, it also acquired ZigZag, an AI-supported local shopping platform, to diversify its services and lead the local e-commerce ecosystem.
Diversifying Existing Businesses with OTT Services
Previously, Kakao Entertainment’s content business mainly involved uploading clips on Kakao TV, a live broadcast service linked to KakaoTalk. The Kakao content unit also sold content to well-established OTT services, including Netflix Korea and Wavve.
Yoon Eul-Jeong, a Shinyoung Securities analyst, said Kakao Entertainment truly holds a broad original IP (intellectual property) content range. However, its existing business model contains limitations, especially in the profitability aspect. Yoon also said that the INISOFT acquisition is one of Kakao’s efforts to diversify its current profit model.
Furthermore, the company had invested in various entertainment content production companies such as Kross Picture Inc. and Sanai Pictures Co. Kakao Entertainment also supports several music labels and talent management agencies.
Kakao Entertainment’s massive IP library containing countless webtoons and web novels also demonstrates its industry competitiveness. In February, the film Space Sweepers, based on a popular Kakao webtoon, became the most-watched movie on Netflix’s worldwide list. Over the recent years, the fast-growing South Korean OTT service industry’s average yearly growth rate reached 26.3%, valuing more than 780 billion won ($700 million).
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