Warner Tailors New Joint Venture For Korean Market

Warner Music Group chairman/CEO Edgar Bronfman Jr. may call South Korea "the most advanced and progressive mobile music market in the world," but he concedes that what works in Seoul won't necessarily work everywhere.

WMG is launching a precedent-setting joint venture with leading South Korean Internet serice provider and mobile phone company SK Telecom. The new company will take over Warner Music Korea's stable of domestic acts.

The establishment of the new company, WS Entertainment, was announced in Hong Kong earlier this month by Bronfman during the inaugural Music Matters conference.

Bronfman described the joint venture as representing "an entirely new business model in the signing, development and distribution of music."

Under the deal, SK Telecom-affiliated Seoul Records will provide on- and offline distribution of WS Entertainment content. SK Telecom bought a 43.3% stake in Seoul Records, one of the nation's largest artist management and record companies, in May 2005 (billboard.biz, May 27, 2005). Warner Music Korea will now handle international acts only.

Bronfman suggested the new company would combine Warner's A&R expertise with SK Telecom's strength in the digital delivery of content.

Although he noted that South Korean consumers "spend twice as much on mobile music as they do on traditional music formats," Bronfman said that the new business model is specifically market-tailored. "We do not think that WS Entertainment is a universal solution, exportable to territories everywhere," he said.

Stuart Watson, president of Singapore-based marketing and promotion specialist SWAT Enterprises, agrees.

Such deals are most appropriate for developing markets like China and South Korea, which have jumped straight into digital, Watson says. "I see these kinds of moves happening territory by territory."

Watson suggests the region will see "an increasing number of direct deals between repertoire owners and service providers or repertoire owners and telephone companies."

WMG will own 60% of WS Entertainment, with SK Telecom owning the remainder. Warner Music Korea managing director Phillip Oh keeps that title and adds stripes as the new company's managing director. He will report to Warner Music Asia Pacific president Lachie Rutherford.

Warner Music Korea's roster includes such leading domestic names as Baek Jiyoung, DQ, Kyunwoo, Song Changhee and Choi Jungyun.

But not everyone is convinced the Warner-SK Telecom deal points the way forward for the music industry.

"South Korea is the one market in Asia I wouldn't want to see become the model for the rest of Asia, because the telcos are taking such a large share of revenues," one Asian music industry executive says. "I'm not convinced that this kind of vertical-integration strategy is a good idea." ••••