China Mobile Games and Entertainment Group Ltd. (CMGE.US), a unit of Hong Kong-listed VODone Ltd. (00082.HK), will focus more on angel fund investment in the smaller players in the industry, looking beyond organic growth to boost its market share in China, a top executive said.
“We normally buy no more than 20 percent stakes in the small players in the market, with each investment at about 5 million yuan (US$820,760) or less,” Hendrick Sin, vice chairman of CMGE, told the Hong Kong Economic Journal’s EJ Insight.
Although 80 percent of the games developed by CMGE are massively multiplayer online role-playing games (MMORPG) and board games, the company is open to any type of games that potential investment targets have on offer, he said in an interview.
CMGE has set up an angel fund and has invested in eight companies this year, Sin said, without revealing the exact amount of investment. He believes the market share and revenue contribution from those companies can be reflected in half a year.
“We hope to get a larger market share by taking up stakes in other companies; hopefully our market share in China could reach 20 to 30 percent in three years,” Sin said. Currently, the company has 13.1 percent share of the market.
“We only take up small stakes because we would like to control our investment and keep the management team proactive,” he said.
Another thing that his firm bears in mind while seeking investment targets is whether the companies will be complementary to CMGE, he said. Offering an example, he said one of CMGE’s investments was in a company with Wi-Fi technology that enables people to download mobile games via television screens located in some building lobbies.
Consolidation in the industry has started, he said, adding that it has led to some A-share companies from other sectors buying stakes in mobile game firms. Sin expects the consolidation to last for a few more years.
China’s National Social Security Fund has become one of the investors in CMGE, holding a 4.1 percent stake.
CMGE has been developing its business only in China, but the time has come for it to expand overseas, Sin said. “If a Finnish game Angry Birds can make the world go crazy, why can’t Chinese games do the same?” he said.
“We aim to have 50 percent of our revenue contributed by overseas business in the medium term,” Sin said, adding that the company has set up teams to work on that. More details will be announced this month, the executive said.
The company plans to enter Taiwan, Korea and the Southeast Asian nations at the same time, before going to Europe and the United States. “Markets with Chinese people… Korea and Taiwan would be main focus as they are familiar with the Chinese culture, which can be found in many of our games,” Sin said.
“It is important for us to find a local partner in those countries to give us advice on the language used in the games and how should we localize the games,” he said, adding that the partners should own a platform with resources such as advertising or those that can recommend their games.
CMGE is having discussions with potential partners in various countries, including Indonesia, which has a large population. Details will be announced this month as “we want to launch many games in many countries when we announce the details, instead of just one game in a country”, Sin said.
The company aims to develop about 20 social games next year, on top of the existing 15 games while single player games will reach over 100.
CMGE saw its revenue for the third quarter stand at 98.1 million yuan, up 125 percent over that posted in the same period last year, according to a Nov. 15 regulatory filing. Average revenue per paying user account for social games was 24.9 yuan for the period, up from 20.8 yuan in the preceding three months.
CMGE had developed games for feature phones earlier but has shifted to smartphone games from the third quarter last year.
– Contact the reporter at [email protected]