K-pop and comics drive Naver’s strategy beyond Line-Yahoo merger

Linda J. Dodson

SEOUL — When South Korean boy band Super Junior held a concert on Naver’s V Live streaming service May 31, they performed to an empty hall. Instead, the stage backdrop changed to show video feeds from cheering fans around the world.

A ticket cost 33,000 won ($27) — not cheap for a two-hour online event. Yet the concert drew 123,000 viewers from 100 countries.

The concert highlights Naver’s pivot toward entertainment as the South Korean tech company seeks inroads into the U.S. and Europe, markets it struggled to crack with its flagship Line chat app.

This fall, Line will merge with SoftBank Group company Z Holdings, parent of Yahoo Japan, in a deal that will leave Naver searching for a new growth driver. With long-term prospects looking limited at home, Naver is counting on its content business to develop a larger audience overseas.

The V Live app, which has been downloaded 85 million times amid the Korean Wave of pop culture, connects K-pop fans worldwide with their favorite stars.

The service had offered concert broadcasts on demand, but as the coronavirus pandemic forced the cancellation of in-person concerts, V Live looked to online events, as seen in the Super Junior concert.

Until recently, Naver’s overseas expansion revolved around Line, which generated nearly 40% of the company’s revenue in 2019. Though the app took off in Japan, Taiwan, Thailand and a few other markets, intense competition kept Line from gaining traction in the U.S. and Europe. The segment has been bleeding red ink, owing largely to heavy investment in mobile payments.

The South Korean company’s post-Line strategy abroad rests on content distribution, for which it is already building a base in the U.S. and Europe and sees plenty of room to grow.

Naver’s V Live and Webtoon platforms have attracted tens of millions of users. (Photo by Kotaro Hosokawa)

Naver Webtoon, an online comics publishing portal, is particularly promising. The site had 62 million monthly active users as of the end of March, with more than 10 million in North America alone, according to Naver.

Webtoon, whose vertically scrolling comics are ideal for a mobile-first audience, features works by creators from not only South Korea and Japan, but also the U.S. and Southeast Asia. Artists earn revenue based on the number of views, with annual income for the most successful running into the six figures in dollar terms.

Naver is reorganizing its comics distribution to accelerate the company’s worldwide expansion. The American arm is slated to become the global headquarters this year, giving direction to local operations in South Korea, Japan and China. Intellectual property management will be overseen from the U.S., with an eye toward bringing successful series to television or movie screens.

Though content remains a small part of Naver’s operations, generating just 3% of total sales last year, the segment’s revenue jumped 67%. South Korea’s steadily growing content exports, which totaled $9.6 billion in 2018, provide a tailwind as music and comics alone swelled 60% to 70% over the preceding four years.

“The coming of the age of non-face-to-face interaction with the coronavirus crisis is an opportunity for Naver to raise its profile,” said Sung Jong-hwa, an analyst at eBest Investment & Securities.

Working with SoftBank will be key to expanding the content distribution business.

“We can generate synergies between Naver and SoftBank Group going forward,” Naver President Han Seong-sook said.

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