Chinese online games firm ChangYou to invest US$600m in mobile push

Mainland firm looks to acquire new games, boost marketing and seal deals with developers

PUBLISHED : Thursday, 13 March, 2014, 10:11am
UPDATED : Friday, 14 March, 2014, 12:06am a leading mainland developer and operator of online games, will roll out a US$600 million mobile gaming development initiative that represents one of the largest investments in its industry.

The Beijing-based company's publishing subsidiary in the United States unveiled the programme, called "CYOU Win Plan", on Thursday before its formal announcement at the annual Game Developers Conference in San Francisco next week.

"The programme offers a tremendous opportunity for independent gaming developers to publish their games worldwide, leveraging our expertise in both the personal computer and mobile space," said Joey Gia, general manager at ChangYou (US).

ChangYou's plan will provide support for independent gaming developers in marketing, distribution and business operations.

The Nasdaq-listed company has earmarked US$200 million to acquire mobile games, US$200 million in mobile game marketing over the next two years and US$200 million for revenue-sharing arrangements with game developers over three years.

Chief executive Wang Tao committed to an aggressive investment drive last month after the company announced its financial results for last year.

"In order to increase our chances of success in mobile games, aside from in-house development, we are reaching outwards to capitalise on the pool of game development talent outside the company," Wang said.

He also announced new employee incentive plans that would allow staff to participate in specific development projects.

"We believe our investments in such areas will make it possible for us to capture great products to further grow our business and enhance our position as a leading online game company," he said.

Internet consultancy iResearch has forecast the mobile game market on the mainland would be worth 25.8 billion yuan (HK$32.6 billion) by 2016, up from an estimated 11.6 billion yuan this year. That would represent a three-year compound annual growth rate of 31 per cent.

ChangYou reported a 5 per cent decrease in net income last year from a year earlier to US$269 million because of steady increases in expenses for sales, marketing and product development. Revenue rose 18 per cent to US$738 million.

Alicia Yap, head of China investment research at Barclays, said ChangYou was unlikely to be profitable this year owing to its continued heavy investments.

"We think 2014 will be loss-making without clear visibility into the likelihood of success of new games and the sustainability of legacy games," Yap said.

ChangYou has a diverse portfolio of online games that includes several of the most popular on the mainland, such as Tian Long Ba Bu and Wartune, also known as Shen Qu. It also runs a leading game information portal on the mainland.