SM Entertainment and Kakao Launch North American Division

Back in May, upon unveiling seemingly solid first-quarter financials, SM Entertainment disclosed plans to break into North America. Now, the K-pop giant (in which Kakao Corporation possesses a controlling stake) is officially establishing a division in North America “with the aim of accelerating global growth and expansion.”

SM Entertainment and Kakao’s entertainment-focused subsidiary revealed the newly minted unit today, approximately three months after appearing to put their much-publicized showdown with BTS agency Hybe in the rearview. Notably, against the backdrop of continued commercial growth for K-pop, each of the mentioned companies has set its sights on achieving a larger presence on the world stage.

Besides SM’s above-highlighted North American division, the Quality Control owner Hybe is reportedly teeing up close to $400 million worth of acquisitions to accelerate its own global expansion. Additionally, JYP Entertainment inked a bolstered partnership agreement with Universal Music Group in June.

Returning to the SM-Kakao tie-up, however, the involved parties have signaled that the just-established unit “will serve as a solid foundation for business cooperation and knowledge sharing.”

“The companies plan to expand their reach into global markets,” SM and Kakao Entertainment spelled out, “including Europe, in order to strengthen their presence as a key player of [the] global music industry.”

As part of this plan, the entities touched upon their objectives of improving the popularity of already-signed acts (including with “a global management system” for releases, concerts, and more) as well as developing new IP “to further enhance their competitive edge.”

“Strategic investment” is likewise on the table for the hub, with a particular focus on “partnership with overseas labels.” Lastly, in terms of the division’s operational scope, execs are also poised to “prioritize the discovery of local artists and music IPs in North America,” SM and Sony Music-partnered Kakao Entertainment communicated.

On the organizational and personnel sides, Kakao Entertainment America and SM Entertainment USA will be consolidated into the overarching North American office, and higher-ups expect to finalize “detailed plans” sometime “within the year.” Kakao Entertainment America president Joseph Chang (formerly a Sony Music Korea exec) has been tapped to lead the unit.

“The new integrated corporation in North America will help us accelerate the global expansion and growth of artists under Kakao Entertainment and SM Entertainment,” said Chang, who doubles as SM’s chief business officer. “We will prove the growth potential of Kakao Entertainment’s music business, which encompasses planning, production, and distribution of music and artist IP in the global market.”

During today’s trading hours, Kakao stock (KRX: 035720) spiked by seven percent to hit ₩54,900 (currently $42.55) per share, whereas SM Entertainment stock (KOSDAQ: 041510) saw its value grow by roughly three percent to ₩134,700 ($104.40) per share. The latter figure marks a nearly 80 percent boost from 2023’s beginning.