Anchor invests $550m in Japan unit of Korea's Kakao
Anchor Equity Partners, a mid-market private equity firm focused on opportunities in North Asia, with a particular focus on Korea, has invested JPY60 billion ($550 million) in the Japan unit of Korean internet giant Kakao.
The deal values Kakao Japan at JPY800 billion, according to a statement. The new capital will be used to invest in content businesses in Japan. Kakao wants to create a comic-centric content ecosystem with a global footprint.
The Korean company entered Japan in 2016 with Piccoma, an online manga subscription service. Piccoma is now the largest webtoon platform in the country – and the best-selling manga app in the world – with 27 million downloads to date. Since July 2020, it has ranked first in App Store’s books category and in Google Play’s comic category in Japan.
Piccoma generated JPY37.6 billion in gross merchandise value (GMV) in 2020, up 144% year-on-year. The company’s revenue from subscription content reached KRW527.9 billion ($468 million) – up 232.6% year-on-year – and Piccoma contributed KRW228.3 billion to that. The rest came from Kakao Page, a primarily domestic platform. Kakao received a further KRW374.7 billion from the distribution of related intellectual property.
The GMV targets, including intellectual property (IP) distribution, for Piccoma and Kakao Page in 2021 are KRW1 trillion and KRW700 billion, respectively, Kakao said in a recent presentation.
Kakao’s overall revenue was KRW4.2 trillion last year, of which 51% came from its platform operations – mobile messaging service Kakao Talk and related e-commerce channels, web portals such as Daum, and mobility, payments, and enterprise services – and 49% from content assets. The latter include gaming, music streaming, paid content, and IP distribution.
The Kakao Page universe comprises webtoons, TV dramas, movies, games, and web novels. Earlier this year, it merged with music and entertainment division Kakao M to form Kakao Entertainment. The combined entity owns more than 8,500 pieces of original webtoon and web novel content, 62,000 pieces of music, 250 original videos, 15 movies and TV dramas, and 240 other pieces of digital content. It also has in-house production studios, talent, and talent management agencies.
Anchor has a longstanding relationship with Kakao, having invested in Kakao Page – then known as Podotree – in 2016 and Kakao M in 2020. Kakao Japan is controlled by Kakao Entertainment and its parent.
Kakao Entertainment has invested approximately KRW1.5 trillion in web literature and wants to expand its network beyond Korea and Japan. Platforms are set to launch in Taiwan and Thailand next month and in China and India later this year.
Earlier this month, Kakao Entertainment acquired Radish, a Korea and US-based mobile fiction platform, and Tapas Media, a similar business based solely in the US, for a combined $950 million. This is part of a push to expand its original content business in North America and other English-speaking regions. Kakao was previously a minority investor in Radish.
Jinsoo Lee, CEO of Kakao Entertainment, told Bloomberg in April that an IPO in Korea or the US – at a potential valuation of more than KRW20 trillion ($17.8 billion), double its current worth – would happen in 2022. The company plans to spend KRW1 trillion on content this year.
The global push is intended to leverage strong international appetite for Korean cultural assets, from music to TV dramas to movies. “Our goal is to establish our webtoon platform around the world, in every country in every language. We are at about 10% of that goal,” Lee said.
Lee worked for Naver Corporation, which also has a webtoon division, until 2009 when he established Podotree with seed funding from Kakao’s founder. The start-up gained traction by selling digital comics by the chapter, with prices falling each day after release. Kakao took full ownership of Podotree in 2015, a year after merging with Daum Communications.
Other recent private equity activity in Japan's comic space includes NSSK's sale of Bunkasha Publishing to local internet content provider Beagle. The GP bought the business in 2017 and immediately set about digitizing it, moving the entire manga library from paper to the cloud.
Manga is a significant literary presence in Japan, cutting across all genres. Readers are increasingly consuming it through digital channels, with the market reaching JPY259.3 billion in 2019, according to the All Japan Magazine & Book Publishers and Editors Association. It has grown 24% over the past five years.
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