Digital comics are a serious business for private equity

These aren’t the cartoons of your childhood. Comics are big business in Asia, particularly if they are published online. So much so that the largest private equity transaction in Japan this year is for a digital comic distributor.

Blackstone on Tuesday said it would launch a tender offer for Infocom, reportedly valuing the online comic company at about $1.8bn. Other comic fans will be paying attention: a deal could set the tone for rivals looking to list.

Infocom operates MechaComic, which is Japan’s largest digital distribution platform for comics. Net profit at the company, where digital comics account for nearly three-quarters of its sales, nearly doubled in fiscal 2023.

Digital comics, historically popular in Asia, have been gaining traction in other markets such as the US in recent years. Webtoons, a type of digital comic that originated in South Korea, in particular have been winning over a global readership. These are short comics that are read vertically by scrolling down on a smartphone.

Webtoons are an especially lucrative business. That is because they have a diversified business model: users pay per episode they read using micropayments, while advertising adds a boost. Later, sales of print copies of the webtoons, merchandising and licensing rights for film adaptations continue bringing in revenues years after the webtoon is uploaded.

Webtoon Solo Levelling for example became a global hit in 2018 — with readers in Germany and Brazil pushing estimated monthly revenues for the comic to $20mn. A long list of other hit webtoons including Love Alarm, Itaewon Class and All of Us Are Dead have become Netflix original series.

California-based Webtoon Entertainment, which oversees South Korean internet group Naver’s webtoon business, is targeting a $2.7bn valuation in its listing in New York, after filing for an offering of 15mn shares this week. This underscores the growing interest in the sector. Accounts managed by BlackRock could take up to $50mn in shares as a cornerstone investor.

This trend is strong in China, where shares of Chinese rival China Literature Group, a subsidiary of social media giant Tencent, are up 27 per cent from a February low. A growing number of users and rising operating profit should boost those margins to new highs of about 15 per cent, according to S&P Capital IQ.

There is even an AI angle: artificial intelligence could mean rapid growth in the newly created content on these platforms, boosting revenues. AI tools speed up the sketching and illustration process of webtoons — currently done by hand — leaving creators more time to focus on storytelling and planning. Digital comics are serious stuff.

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