SEOUL -- Netmarble, a leading South Korean game publisher, vowed to actively nurture the smart home subscription economy business using artificial intelligence and other advanced technologies after it was selected as a preferred bidder for a controlling stake in a water and air purifier maker controlled by South Korea’s second-tier conglomerate Woongjin Group.
Netmarble showed a strong interest in acquiring a 25.08 percent stake in Coway while other potential candidates hemmed and hawed. The price was estimated at 1.83 trillion won ($1.54 billion). The subscription economy refers to the business of offering subscriptions to consumers. Smart home companies pursue bundled services that combine monthly subscriptions with connected home fixtures and appliances.
Netmarble CEO Kwon Young-sik said in a conference call on Monday that his company was entering the subscribed economy industry to secure new growth engines and diversify its business portfolio. "It wasn't because of the limits to the game industry or the uncertainty about its growth," he said, vowing to actively invest the game industry.
Netmarble's sales fell 16.6 percent one-year to 2.21 trillion won in 2018, but the game publisher has made active investments in a variety of areas. In April last year, it acquired a 25.71 percent stake in Big Hit Entertainment to become the second-largest shareholder of BTS' management agency.
Boasting a full tank of cash in reserve, Netmarble vice present Seo Jang-won said Netmarble would try to become a major player in the global smart home subscription economy using accumulated know-how and technologies in artificial intelligence and cloud. "If Netmarble's AI, big data, and cloud technologies are combined into existing businesses, it has the potential to become a major player in the global smart home subscription economy."
"Our goal is to develop these technologies and know-how into smart home devices by applying them to all of Coway's products," Seo said, adding Netmarble would enhance its business stability by acquiring a platform-type subscribed economy operator that is growing and can develop into a smart home field in the future.
"The reason why the real-life subscribed economy model has not been globally successful is because of the wide regional coverage issue," Seo said. "But with recent developments in AI and cloud technologies and delivery networks, the subscription economy is rapidly emerging as the mainstream."
Seo said the subscription economy can generate stable cash flow. "Rental models have been slow to change, but they have growth potential as a result of their combination with IT technology in the future."
Coway, which used to be Woongjin's flagship business, produces and rents home appliances such as water filtration appliances, air purifiers, bidets and water softeners. MBK Partners, a Seoul-based private equity firm, bought a 26.8 percent stake in Coway for about 1.2 trillion won in 2013 when Woongjin Group was reeling from financial woes caused by rapid business expansion.
In March, Woongjin completed the acquisition of a 22.17 percent stake in Coway for 1.685 trillion won. Coway maintains its brand recognition among South Korean consumers as the country's first water purifier maker, but Woongjin is still under pressure to improve its financial status.
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