Big-spending Chinese game companies armed with significant financial resources are rushing into the Korean market. (Image : Yonhap)
SEOUL, March 10 (Korea Bizwire) – Big-spending Chinese game companies armed with significant financial resources are rushing into the Korean market. As the ‘allies’ are engaged in strategic collaboration followed by equity acquisition, some industry officials are concerned that Korean game developers might fall into the hands of Chinese gaming companies. However, some consider the Chinese companies to be ‘white knights’ that have invested much needed capital in the Korean market.
NHN Entertainment decided to transfer 100 percent of its stake in veteran game developer Webzen to a Chinese company called FunGame. FunGame is a special purpose company (SPC) Chinese game developer OurPalm established to close the deal.
OurPalm, which created quite a stir when it took over TIANMA, the developer of the game ‘MU Miracle’, currently ranks third in the Chinese gaming industry after Tencent and NetEase.
NHN Entertainment held a 19.2 percent stake in Webzen, and through the 200 billion won deal, OurPalm became Webzen’s second largest shareholder.
Prior to the deal between NHN Entertainment and OurPalm, Chinese game developers continuously made inroads in the Korean gaming market. Tencent was the company that moved the fastest.
Tencent invested 530 billion won in Netmarble Games, 130 billion won in Four Thirty, and 20 billion won in Party Games. The company previously invested 72 billion won in Kakao, giving it the title of the second largest shareholder in the enterprise.
While Chinese gaming companies are throwing money at the Korean market, those in the industry are concerned over a manpower and technology drain. They even worry about a day when Korean game companies are completely sold to Chinese businesses after pieces of the companies are handed over bit by bit. Even if management doesn’t fall into the hand of the Chinese, they might pressure decision making processes as giant shareholders.
Veteran Korean game developer Actozsoft falling into the hands of the Chinese company Shanda in 2004 could be a good example. When the merger took place, most of the employees were laid off. Currently the company is called Identity Mobile, and has made a switch from developing software for the PC market to focusing on the mobile space.
However, some say that the Chinese invasion might have a silver lining.
Given Korea’s small investment market, gaming companies have nowhere to turn when they need new investors.
Netmarble chair Bang Joon-hyuk once talked about why the company chose to partner with Tencent. “We needed at least 500 billion won. However, we couldn’t find a Korean investor willing to come up with that amount. That is why we selected Tencent”, he said.
Gaming industry officials admit that there few investors in Korea willing to invest hundreds of billions of won in gaming companies. They say that Chinese capital might be the ‘white knight’ that will save them from financial difficulties.
By Francine Jung (francine.jung@kobizmedia.co.kr)
