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South Korean webtoons look to K-Wave for success

South Korean webtoons look to K-Wave for success

International TV viewers may have loved the Korean dramas “All of Us Are Dead,” “Itaewon Class” and “Dr. Brain” without realizing that each originated as a webtoon or online comic.

A group of Korean companies is now gearing up to ensure webtoons are the next big thing in the global K-culture takeover.

Webtoon was launched in the early years of the new century when Yahoo and the Korean Internet portal Daum began publishing news and cartoons only on the web. It was a free way to generate traffic and retain readers that worked almost as well as a print newspaper with daily comics.

Kang Full is widely recognized for creating the first webtoon “Love Story” in 2003. With seven subsequent webtoon-to-screen adaptations, he is still going strong and is responsible for the IP behind the upcoming Disney+ series “Moving”.

Webtoons, which are mostly digital originals, took an evolutionary leap with the advent of smartphones and vertical scrolling. Companies like Naver Webtoon, founded in 2004, started as platforms that carried new content.

“Smartphones made it a business with profit potential,” says Charlie Park, who currently heads the global webtoon business at Kakao Entertainment, which grew out of a webtoon startup (called Podotree) founded in 2010. “And once we established this as a viable business in Korea, we turned to Japan, which seemed fertile ground for manga because of its existing audience.”

The Korea Creative Content Agency (KOCCA) estimates that the market in Korea will exceed $1 billion annually in 2020. Since then, it has continued to grow, spurred on by the pandemic. Naver alone reported $900 million in gross webtoon merchandise in 2021, driven by more than 80 million monthly active users.

Given that this number exceeds the entire population of South Korea, the export drive seems to be working. KOCCA data shows that Japan accounts for nearly a third of webtoon exports in 2020, followed by mainland China with 23%. North America is rated 16% and other parts of East Asia, especially Thailand, another 23%.

Today, the sector is led by platforms that are offshoots of Korean tech leaders Naver Webtoon (Naver) and Kakao Entertainment (Kakao), and Nate (telco SK Global).

Platforms work with content providers (essentially mini-publishing firms), investors, and individual creators and are responsible for marketing and revenue generation. In some cases, they provide technical tools to help with drawing, stenciling, and shading. This helps keep production costs down and profit margins healthy.

However, the market is also fluid and rapidly changing, offering several different business models. These range from recurring subscriptions to Kakao’s popular “wait or pay” system, which allows users to either wait for the next episode or pay to read the next one in advance, and micropayments for individual episodes.

Comics, a tier-2 platform with approximately 22 million monthly active users and more than 60 million subscribers, was recently acquired for $160 million by Terapin Studios, an arm of US-Korean media investor NPX Capital. Comics, which already offers its webtoons in English, Chinese, and several European languages, sees overseas markets as having huge potential and a more level playing field.

“They offer a wide untapped audience that is now increasingly interested in Korean pop culture, and also have lower client acquisition costs than the more crowded Japanese and Korean markets,” says Samuel Hwang, founder, and CEO of NPX.

While Kakao’s Park says the webtoon market is still in a growth phase, pointing to organic expansion rather than corporate M&A shortly, the sector has already seen one of the most prominent examples of corporate activity. In 2021, Naver paid $600 million to buy Wattpad, a Canadian online literary platform whose online authors were responsible for movies like “Po” and “Kissing Booth.” The two companies are now integrated as Wattpad Webtoon Studios under Aron Levitz, who said at the time that the deal was focused on “the next hundred years of literature.”

The ability to create movies, series and games with a proven audience resonates throughout the webtoon industry. A Korean third-party production company is partnering with Netflix to adapt Toomics’ “Black Knight.” “But in future productions, we would expect Toomics to be a partner,” says Hwang.

“We describe ourselves more as a ‘story company’ than a comics company,” says Park. “That’s because whether you look at webtoons, novels, or music, the story is what transcends them all. And right now, webtoons are telling young, vibrant, vibrant stories.”

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