What does the IU ransom controversy have to do with Kakao Entertainment's listing?

As the news emerged that singer and actress IU will receive the industry's highest drama appearance fee, some in the entertainment and securities industries on the 10th are raising the view that it may be closely related to the listing of Kakao Entertainment, which is scheduled for this year. It is pointed out that the logic of 'IU's ransom = increase in corporate value' was applied behind the controversy that IU herself did not want.

The reason why IU's salary received attention was when there was talk that she would receive a large amount of money for appearing in the drama 'Fooled by the Wild', which is supplied to Netflix. Some media outlets predicted that the appearance fee would reach 500 million won per episode, but the production company, Pan Entertainment, clearly drew the line, saying, "It is groundless." However, there are many rumors in the industry that although it is not 500 million, it is true that it is the highest level in the industry.

IU has established herself at the top as a singer. IU as an actress is a different story. IU proved her acting skills through 'My Mister' and 'Hotel Del Luna'. However, in order to become a 'top-level actor', one must be recognized for a variety of appearances, ability to digest various characters, and market influence. IU herself is still not comfortable with the fact that she is receiving the 'top level' appearance fee, beating out her senior actors.

Why did this controversy arise? First of all, it is the effect of changes in the way we consume content. The market is being reorganized centered on OTT (Internet video service). The export environment for 'content copyright' has changed. There are many ways for production companies to make profits, including sales costs, OTT sales, and overseas distribution rights. Among these, the biggest profit comes from overseas sales rights. IU is also gaining great popularity overseas as a singer. It is inevitable that not only IU's value as an actress but also singer IU's value will be reflected.

The problem is that there are still many people who are 'slanted' while looking at the controversy over IU's ransom. For this reason, some are even analyzing whether this is a strategy to increase the corporate value of Kakao Entertainment, which is preparing for listing in the second half of the year. The financial investment industry predicts that Kakao Entertainment's value will reach up to 20 trillion won.

While Kakao Entertainment pursued external growth through aggressive mergers and acquisitions (M&A), it was pointed out that its IP power and profitability based on its artists were somewhat lacking. Industry insiders explain that the news that a star like IU has established herself at the 'best level in the industry' not only in the field of music but also in the field of acting is clearly positive for corporate value.

In fact, Kakao Entertainment is the parent company that holds a 52.5% stake in Edam Entertainment, which IU belongs to. Edam Entertainment's sales last year were KRW 48.4 billion, up 64.6% from the previous year (KRW 29.4 billion). Most of the profits come from IU. IU herself owns a 22.5% stake in Edam Entertainment. Some industry sources say that since Pan Entertainment has been collaborating with large entertainment companies, including Kakao Entertainment, and has no choice but to do so regarding in the future, it may have promised various cooperation IU's appearance fee and future content supply contracts.

It is natural market logic for popular actors to receive large amounts of money. However, there are also voices of concern over the situation where the belly button is bigger than the stomach. Now, the public can't help but look at IU's acting and think about whether it deserves the industry's highest appearance fee. For IU, it's like picking up a poisoned chalice. There are many concerns that the rapid increase in production costs for content companies may ultimately lead to a deterioration in the profitability of the industry as a whole. Whether this controversy over appearance fees was a trick or a handshake, the lid will be lifted soon.

Reporter Junho Yoon, Ten Asia delo410@tenasia.co.kr