South Korea's Biggest Music Subscription Service Acquired by Mobile Messaging Company

Courtesy of Yedang Entertainment


More and more, popular Asian messaging apps are launching music streaming after they reach critical mass.

The maker of a popular South Korean messaging app has invested in company behind South Korea's most popular music streaming service. Kakao has invested $1.55 billion for a 76.4 percent stake in Loen Entertainment, the operator of the MelOn music streaming service. MelOn, launched in 2009, is the biggest music streaming service in South Korea, with 28 million users according to the the Korea Times, although its subscriber count is far lower.

MelOn will join the country's most popular mobile messaging app, KakaoTalk, which reportedly had 48 million active users in February. The app is the flagship product of Kakao, a South Korean tech company with a $5.7 billion market capitalization. “By combining Kakao’s various platforms and content services and Loen’s leading music content, we expect tremendous synergy that could establish a strong foundation for global expansion," Kakao CEO Jimmy Rim.

South Korea was early to adopt music subscription services -- its $139.6 million of subscription revenue generated in 2015 accounted for 92.3 percent of all digital revenue and 53 percent of total trade revenue, according to the IFPI. As a point of comparison, revenue from both subscriptions ad-supported streaming made up 14.3 percent of U.S. trade revenue.

MelOn has been a leader in the market. According to a 2013 report by MIDiA Consulting, it was the first subscription service in the world to have 1 million paying customers and had 2 million -- with 18 million registered users -- at press time. The service's monthly fee was recently hiked to about $5.60, up from $3.00. Its website says it has 2.6 million songs, less than a tenth of the a typical catalog supporting a Western services like Spotify.

More and more, messaging apps are launching music services in Asia. Line, the popular Japanese messaging app, acquired MixRadio from Microsoft in late 2014 and launched its own streaming service last year. In June, China's TenCent, maker of WeChat, launched a music service of its own, Joox. WeChat, the world's most popular messaging app, surpassed 650 million active users in September.

The combination of messaging apps and music is more primitive in Western markets; partnerships with mobile carriers, such as between Deezer and Orange, bundle the service with mobile plans and often include carrier billing to facilitate monthly payments. But integration with messaging apps is scarce. Instead, Western markets are seeing a slew of music-focused messaging apps that attempt to draw users through social features. The closest parallel is Snapchat's addition of entertainment content last year, although Warner Music Group dropped out in just a few months.