The gaming company behind the first Chinese Marvel superheroes is betting big on online comics

Chinese video games and e-commerce company NetEase is betting on the country’s large online comics market to help drive future growth, as competition among major internet companies continues to heat up in the digital entertainment sector.

“Working with Chinese comic studios and licensing the rights for popular series helps us to lay out a plan for the future,” Dara Luo, marketing director at NetEase Comics, said in an interview. “We can generate revenue from any games, or animation, that NetEase may eventually produce based on the original comics.”

Luo said NetEase was looking to expand the content of its online comics business, which is currently not focused on generating revenue for the Beijing-based company.

NetEase Comics, which was spun off from the parent firm’s online reading platform in 2015, currently publishes various series from more than 100 comics studios in China. It also licenses content from comics publishers in countries such as Japan and South Korea.

Chinese superheroes Sword Master and Aero join the fight against evil in Marvel universe

Nasdaq-traded NetEase signed a deal last year with Marvel Entertainment, a subsidiary of The Walt Disney Company, to create Chinese superheroes who will join Marvel’s popular franchise, which include US comic book legends-turned-global box-office stars Spider-Man, Iron Man, Captain America and the X-Men.

In May, NetEase launched two new sets of online comics with Chinese superheroes Sword Master and Aero as central characters.

In the Sword Master comics, 18-year old Lin Lie fights villains with an ancient sword found by his archaeologist father.

The Aero series features a young female architect, Lei Ling, who uses her power to control air currents against assorted bad guys.

In China, the online comics market has become one of the busiest areas where internet giants compete to acquire more content, which are used to further build up related businesses in video games, video live-streaming, film and animation – a strategy geared towards attracting new users and retain existing subscribers to their respective ecosystems.

The number of online readers on the mainland jumped 76.2 per cent to reach 70.75 million in 2016, according to market research firm iResearch. Estimates from a government report on China’s online comics publishing market said the country had more than 90,000 artists involved in producing 150,000 web comics in 2016, drawing over 200 billion hits from some 70 million readers.

NetEase and Tencent Holdings are among the major players in China’s online comics market, which has a largely young audience willing to splurge on various digital entertainment options.

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NetEase, whose main revenue source has been its video games business, has extended its reach in digital entertainment through its NetEase Cloud Music streaming service. It also operates e-commerce platforms Kaola and Yanxuan.

Shenzhen-based Tencent, China’s largest social media and video games company, is also the country’s leading online music-streaming services provider. It operates China’s three most popular music-streaming platforms, QQ Music, Kugou Music and Kuwo Music. These three online channels have a combined 700 million monthly active users.

Tencent Music had a 77 per cent share of music-streaming revenue in China in 2016, followed by NetEase Cloud Music and Alibaba Group Holding’s Xiami Music, according to a Jefferies report. New York-traded Alibaba is the parent company of the South China Morning Post.

Those internet players compete in China’s vast entertainment and media market, which is estimated to be worth US$228.1 billion this year, according to PwC. The country, which is the world’s biggest smartphone market, had 772 million internet users last year.

NetEase’s efforts in the online comics business, however, has largely been focused on the Asian market, which is behind Tencent’s international expansion initiative.

Hong Kong-listed Tencent last year entered the North American comics market through a pact with San Francisco-based digital publisher Tapas Media, a partnership that provided English-language versions of a number of popular online Chinese titles. Those included Fox Spirit Matchmaker, a supernatural romance novel that was one of the most popular titles from the internet giant’s Tencent Animation & Comics unit.

NetEase’s efforts in China’s online comics market is expected to further expand the number of users on its ecosystem, according to Luo. These included diehard comics fans who generate their own content and upload these to the NetEase Comics platform.

“About 80 per cent of our 40 million users are below the age of 25, many of them are university or middle school students,” Luo said.

These users are particularly attractive for the company as they are more likely to consume other content, such as games and films, based on a comic series in future, especially if they are already loyal fans of a comics series now, Luo said.