South Korea's distribution sector looks set for a major realignment, with CJ Entertainment announcing plans to invest in both halves of soon-to-be-split rival Plenus Entertainment.

CJ's initial focus will be on the internet/game business, part of its efforts to expand into a "total entertainment company" encompassing film, exhibition, cable TV, and games.

This weekend it announced the purchase of a 18.8% controlling stake in Plenus, which is a major player in the lucrative online game industry through its NetMarble internet business. The $69.6m (WON 80bn) purchase of shares from primary shareholder Bang Joon-hyuk was jointly funded by CJ Entertainment ($36.5m) and parent company CJ Corp. ($33.1m).

Although CJ will gain management control of the company, it has given NetMarble founder Bang a three-year mandate to continue running the business.

Meanwhile, rival distributor Cinema Service, which is scheduled to complete its formal separation from Plenus on May 28 (see, January 16), looks likely to receive a substantial cash infusion from CJ Entertainment.

Cinema Service, which will need to provide Plenus with an estimated $69.6m (WON 80bn) to secure its independence, is expected to receive a portion of this amount (up to 25%, according to local press reports) from CJ Entertainment.

Although exact terms of the deal are not confirmed -- one solution floated was for Cinema Service to provide CJ Entertainment with the rights to three films per year -- CJ has stressed that Cinema Service will remain an independently-managed, separate entity.

"We expect no change in the management or operation of both businesses, and we will continue to compete as independent entities," CJ Entertainment CEO Park Dong-ho is quoted as saying.

As such, the local film industry has adopted a guardedly neutral response to this development, in contrast to the widespread concern that greeted news of the two companies' intended merger in early 2003. The merger was later called off.