SM Entertainment and Kakao to launch integrated North American division

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After winning in its battle against HYBE for a majority stake in SM Entertainment, Kakao Corp. and SM are expanding their alliance to North America with plans to merge their units in the region.

The companies, in a joint press release on Tuesday (August 1), outlined their vision to combine SM’s global intellectual property (IP) and production capabilities with Kakao’s music distribution network and multi-label system. 

The aim is to promote artists from both companies, including Kakao-owned Starship Entertainment’s girl group IVE, as well as SM’s girl group Aespa and boy band NCT.

“Through the North American integrated corporation, we will accelerate the global advancement and growth of Kakao Entertainment and SM Entertainment’s artists, and based on this, we will expand the growth potential of Kakao Entertainment’s music business, which encompasses planning, production, and distribution of music and artist IP, to the global market,” Kakao Entertainment America CEO Joseph Chang (Jang Yoon-jung) said.

Joseph Chang (Jang Yoon-jung) will lead the new North American company. He will be in charge of Kakao’s global strategy officer and SM’s chief business officer.

The plan came around six months after Kakao confirmed reports that it has established an entity in the US in December with SM Entertainment to manage artists in the Americas.

However, that “undisclosed deal” came at the time when HYBE and Kakao were battling to take control of SM.

In addition to its deal with SM, Kakao has been ramping up its efforts to expand in the US via partnerships with other companies like Sony Music‘s Columbia Records. The pair formed an alliance in March to manage IVE. Kakao at the time said the partnership will allow it to expand its music distribution network in the US and “elevate its position in the global market.”

For its part, SM has also been eyeing a US expansion. Back in March, the company disclosed in an investor presentation that it plans to acquire a US-based music company to accelerate its global push.

The company had said that it plans to spend 200 billion South Korea won (approx. USD $155 million) on this investment strategy.

By merging their North American arms, Kakao and SM Entertainment intend to establish North America as a core base for their global expansion plan. The companies aim to become leading players in the global K-Pop scene and drive the export of K-culture, they said.

The combined company is expected to speed up the global advancement of artists from both companies and focus on discovering and investing in new IPs to enhance the competitiveness of the global music business, the companies said.

The plan is to provide support for artists’ local activities such as album releases, performances, broadcasting, and promotions.

Additionally, SM and Kakao say that will strike strategic investments and partnerships with overseas labels.

The companies are expected to complete the detailed procedures to integrate the two units within this year.

Following the launch of the North American entity, Kakao, Kakao Entertainment, and SM Entertainment say that they are planning “additional business cooperation”.

Music Business Worldwide

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