Kakao Entertainment, the company with the “best” artist, IU, is in the red. It’s the first time in seven years that the company has been in the red.
Kakao Entertainment (KakaoEnter) is regarded as a well-known company within the Kakao community. It owns a number of super intellectual property (IP), including top artist IU, and is considered the only company that will surpass BTS’s Hive when it goes public. Kakao Entertainment is also ranked second in the entire entertainment industry after Hive in terms of sales of acquired music by SM.
Last year, Kakao Entertainment posted an operating loss of 13.8 billion won. The only consolation is that its revenue (KRW 1.864 trillion, consolidated) increased year-on-year. This year, the situation is reportedly not much different.
The company is said to be in the red despite having one of the biggest stars in the world, IU.
Kakao Entertainment’s deficit is even more painful given that other major entertainment companies such as Hive, JYP Entertainment, and YG are posting record-breaking results. The sluggishness of Tapas Entertainment, its overseas content business, seems to have had a major impact.
While the company has grown significantly in size through aggressive mergers and acquisitions (M&A), it has been criticized for its lack of 안전놀이터IP power and profitability based on its artists.
An industry insider said, “A star like IU has established an ‘industry-leading’ position in the field of actors as well as singers, which is definitely positive for Kakao’s value.” However, “Compared to Hive, it lacks the IP power and profitability of its artists.”
Kakaoent is the parent company of Idam Entertainment, which holds a 52.5% stake in IU. Most of Idam Entertainment’s revenue comes from IU.
Hive, on the other hand, posted a record first quarter despite the BTS hiatus.
Kakao TV Original Content. Kakao TV paid content production has been suspended due to poor performance.
Red flags ahead of listing Initially, the financial investment industry expected Kakao Entertainment to fetch a ransom of KRW 20 trillion when it went public. Currently, Hive’s market capitalization is 11 trillion won, far exceeding that figure.
Stung by the losses, Kakao Entertainment is restructuring its workforce and business, and is in urgent need of improving its profitability, especially as it prepares to go public. Recently, the company also suspended its Kakao TV paid content production service. It is pointed out that the suspension of the Kakao TV business was already predicted. Compared to the increased production costs, there are very few successful contents such as entertainment and dramas.
Meanwhile, Kakaoent plans to increase profitability by producing various contents such as webtoons, web novels, and videos using artist IP. In particular, it is aiming for synergistic effects and increased corporate value through the acquisition of SM, which has a number of famous artists.