Dreamus Company, which operates the audio source streaming platform 'FLO', succeeded in turning a profit in the first half of this year, leading to expectations that the ongoing sale process will gain momentum. Dreamus Company is a subsidiary in which SK Square holds 38.67% equity, and SK Square is accelerating the sale of non-core businesses, including Dreamus Company, as part of SK Group's rebalancing strategy.
According to industry sources on the 21st, SK Square selected four candidates as preferred negotiators for Dreamus Company at the end of last month: YG Plus, Busan Equity Partners (EP), Be My Friends, and the Daemyung GEC·JC Partners consortium. Following due diligence, the stock purchase agreement (SPA) is expected to be finalized as early as early September or by the end of September at the latest.
Dreamus Company originated from the MP3 player manufacturer 'iRiver', which SK Telecom acquired for 30 billion won in 2014. After launching the audio source streaming service 'FLO' in 2018, it changed its name to Dreamus Company in 2019 and was incorporated into SK Square in 2021. However, due to FLO's underperformance, Dreamus Company recorded losses for three consecutive years from 2022 to 2024. FLO's monthly active users (MAU) dropped from about 2.3 million in 2021 to 1.7 million this year, lagging behind competitors like YouTube Music, Melon, and Spotify.
According to market research firms Wise App and Retail, as of May, the rankings of audio source streaming services by user count were as follows: YouTube Music with 9.82 million users, Melon with 6.54 million users, Spotify with 3.59 million users, GENIE MUSIC with 2.63 million users, and FLO with 1.75 million users, ranking fifth.
The audio source streaming service has struggled, leading to poor performance over the past three years. Last year, Dreamus Company's annual revenue was 225 billion won, down 1.7% compared to the previous year, and it recorded an operating loss of 3.1 billion won. Previously, in 2022 and 2023, the company also posted losses of 8.7 billion won and 3.3 billion won, respectively.
Industry experts attribute the entry of four corporations into the acquisition race despite Dreamus Company posting losses for three consecutive years to the growth potential of its audio source platform distribution business. Audio sources flow from artists to distributors and then to audio source streaming platforms, and Dreamus Company plays the role of a distributor, supplying audio sources created by planning companies to streaming platforms and settling the revenue generated. Major domestic audio distribution companies include Kakao Entertainment, YG Plus, a subsidiary of YG Entertainment, and GENIE MUSIC.
Dreamus Company has distribution contracts with major domestic music production companies, including JYP Entertainment, P Nation, Mulgoji Music, and Mystic Story. Unlike the highly competitive and already saturated audio source streaming market, the audio distribution market is expected to have high growth potential due to the global popularity of K-pop, with more interested corporations than anticipated. According to the Korea Culture and Tourism Institute (KCTI), K-pop overseas sales in 2023 are estimated to have increased by 34.3% from the previous year to 1.2377 trillion won, with streaming service revenue amounting to 260.3 billion won, approximately 3.4 times larger than in 2017.
For YG Plus, which is participating as a candidate in the acquisition race, it is analyzed that acquiring Dreamus Company will enhance its market share in the audio distribution market, allowing it to compete with Kakao Entertainment for the top position.
Dreamus Company is also engaged in the production and planning of MD products, such as K-pop concert light sticks and goods. An industry official noted, "Some acquisition candidates expect Dreamus Company's MD business to be profitable, creating significant synergy with the entertainment business."
The expectation that Dreamus Company will escape from losses this year due to improved profitability is also cited as one of the factors contributing to the success of the sale. In the first half of this year, Dreamus Company's revenue was 105 billion won, a 0.2% decrease from the same period last year, but it recorded an operating profit of 100 million won. The rise in the value of equity in K-pop startup Titan Content, in which it invested in 2023, also contributed to turning net profit into 3.3 billion won.
A company official explained, "The improvement in performance was due to efforts to reorganize through an overall rebalancing strategy, including sorting out non-core businesses." Dreamus Company has liquidated audio content production company Studio Dolphin and sold its device business, including iRiver, restructuring into a music and entertainment-focused business model. Kim Dong-hoon, CEO of Dreamus Company, stated, "In the second half, we will work towards revenue growth and profit improvement by providing an integrated solution encompassing audio distribution, performances, and MD products."
As of this day, Dreamus Company's market capitalization is approximately 148 billion won. If SK Square sells its 38.67% equity, the book value is about 50 billion won. Applying a management premium, the sale price is estimated to reach around 100 billion won.