Hangzhou style? Alibaba’s music arm chases slice of K-pop pie with US$30 million investment in South Korea’s SM Entertainment

E-commerce powerhouse Alibaba Group may be going “Gangnam Style” as it invests KRW35.5 billion (about US$29.5 million) to take a minority stake in SM Entertainment, operator of one of the biggest record labels in South Korea’s booming K-pop industry.

That deal is part of a strategic partnership announced yesterday between Alibaba Music Group, a subsidiary of New York-traded Alibaba, and SM Entertainment in the areas of online music distribution and e-commerce in mainland China.

“The investment will pave the way for extensive collaboration between SM Entertainment and our music business flagship, Alibaba Music Group, that will harness our diversified platforms to better serve the customers in our ecosystem,” an Alibaba spokeswoman said.

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Ali Music was established last year as one of the main pillars of the ambitious digital entertainment strategy drawn up by Alibaba, based in Hangzhou in eastern Zhejiang province.

The acquisition of a 4 per cent shareholding in SM Entertainment, also known as South Korea’s leading entertainment agency, provides Ali Music with access to a roster of prominent recording artists like TVXQ, Girls’ Generation and singer BoA, the “Queen of Korean Pop”.

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In a statement, SM Entertainment said the alliance with Ali Music would enable the company to “continue to localise and expand our business in China”.

Earlier reported rights agreements secured by Ali Music included those with BMG, as well as Taiwanese labels Rock Records and HIM Records. The deal with BMG includes recordings by popular artists that include The Rolling Stones.

BNP Paribas analyst Ling Vey-sern said in a report that Alibaba made 23 investments totalling US$11 billion last year as it focused on building content and online-to-offline local services in China.

“We estimate Alibaba could spend, at most, a further US$38 billion [in acquisitions] in 2016,” Ling said.

In December, Alibaba agreed to buy the South China Morning Post and all other media assets from the SCMP Group.