The South Korean Fair Trade Commission (FTC) has conditionally approved Kakao’s acquisition of a 39.87 percent stake in SM Entertainment, marking a significant shift in the country’s music industry landscape. This deal cements Kakao, which operates Melon—the nation’s top digital music distribution platform—as a formidable entity in music production and distribution.
Kakao, known for its extensive roles in music production and platform operations, and for artists like IU and IVE, will now integrate SM Entertainment’s impressive roster, including popular groups aespa and NCT. This merger, which has been under FTC review since April last year, is set to enhance Kakao’s position in the music planning and production sector, where it previously lagged.
With this acquisition, Kakao’s market share is expected to surge across various segments of the music industry. It will rise to 13.3 percent in music planning and production, 43.0 percent in music distribution, and 43.6 percent in the platform market. These figures are even more pronounced in the popular music sector, where Kakao’s effective market share will reach 60 percent.
However, the FTC has expressed concerns about potential market abuses due to this merger. Specific worries include the possibility of Kakao prioritizing the distribution of new tracks from top artists on Melon, potentially delaying releases to competing platforms or featuring its artists more prominently on Melon’s key playlists, which could stifle competition.
To address these concerns, the FTC has mandated two key corrective measures. Firstly, Kakao is required not to unfairly withhold music from competing platforms. Secondly, it must set up an external oversight committee independent of Melon to ensure that no preferential treatment is given to its artists on the platform. These measures are to be enforced for the next three years, with Kakao retaining the right to request adjustments should significant market changes occur, particularly considering the rise of global platforms like YouTube Music and Spotify.
This strategic merger positions Kakao as a new mega “music giant” in South Korea, promising to reshape the dynamics of the domestic music industry while maintaining regulatory safeguards to protect market fairness.
