Kakao to absorb AI subsidiary Kakao Brain

Kakao Corp. CEO Chung Shin-a

Kakao Corp. has decided to absorb Kakao Brain, an artificial intelligence (AI) research and development (R&D) subsidiary, into its headquarters, in a strategic move to consolidate AI capabilities under one roof.

Kakao’s board on Thursday approved the company’s decision to transfer the organization for language model, image generation model, and other business assets from Kakao Brain to its headquarters.

Kakao will also absorb its real estate development and supply subsidiary, Kakao Space, into the main company.

In a statement, Kakao emphasized the consolidation of its technological and service capabilities to accelerate AI service development, saying it will drive the popularization of AI technology in line with the rapidly evolving AI landscape.

Following the integration, which is set to be completed in early June, only the Chief Healthcare Officer (CHO) organization overseeing the AI healthcare imaging solution division will remain within Kakao Brain.

In a separate development, the Fair Trade Commission (FTC) announced on Thursday its conditional approval of Kakao’s stake purchase in SM Entertainment Co.

Kakao’s acquisition of a controlling stake in SM Entertainment had raised concerns about potential competition issues in the digital music streaming market.

To address these concerns, the FTC imposed conditions on Kakao, requiring it not to refuse or delay music supply requests from competitors of its online music streaming platform, Melon, without reasonable grounds. Kakao was also mandated to establish an independent entity tasked with monitoring Melon’s treatment of artists affiliated with Kakao and SM Entertainment.

These corrective measures, to be enforced for the next three years, aim to ensure fair competition in the digital music streaming market amid Kakao’s growing influence in the entertainment industry.

In Korea, the digital music market is largely divided into planning, production, distribution, and platforming.

Among them, SM Entertainment is the No. 1 player in the planning and production market with a share of 13.25 percent, while Kakao maintains the No. 1 position in music distribution (43.02 percent) and platforming represented by Mellon (43.6 percent).