Chinese gaming giant NetEase sells comics business to rival Bilibili, retains rights to Marvel series

China’s second-largest gaming company NetEase has signed a deal to sell its comics business to rival Bilibili, changing track from its previous efforts to build a footprint in the country’s booming online comics market.

Shanghai-based Bilibili, a popular anime-streaming site for Chinese millennials, announced the deal in a Wednesday statement saying that it was acquiring “major assets” from NetEase Comics including its mobile app, website, and copyrights for a large number of stories on these platforms.

A representative from NetEase said in the statement that it will work with Bilibili to create original comics content in the future. Neither company provided details about the specific comics involved or the size of the deal.

NetEase Comics, which was spun off from the Beijing-based parent’s online reading business in 2015, currently publishes over 2,000 comics series, including those from 600 Chinese and overseas artists who gave exclusive distribution rights to the platform. Its app has nearly 40 million registered users.

NetEase’s sale of its comics unit contrasts with the course taken by tech giants such as Alibaba Group Holding and Tencent Holdings, which are investing heavily to broaden their content offerings. Chinese consumers are increasingly willing to pay for original content in the country’s fast-growing billion-dollar digital entertainment industry.

NetEase in May unveiled Marvel’s first Chinese superheroes in two sets of new comics published on its platform, a result of a partnership deal from 2017 between the two companies. NetEase also publishes various Marvel comics including Captain America and Iron Man in China.

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While Bilibili will obtain rights to most of the offerings on NetEase’s platform, NetEase will retain the copyright for its Marvel series, according to people familiar with the matter who wish to remain anonymous as the information is private.

As part of the deal, some employees from NetEase Comics will be relocated to Bilibili’s Shanghai offices, and become its staff after a transition period, according to the people.

Bilibili and NetEase declined to comment beyond the statement. A spokesperson with Marvel did not respond to an emailed request for comment.

The deal comes as many Chinese gaming firms are trying to either cut costs or create new revenue streams to survive Beijing’s crackdown on the world’s biggest gaming market.

The country’s new gaming regulator, the State Administration of Press and Publications (SAPP), was formed in April, but is currently operating without a director and has yet to issue licences to any new games, a prerequisite for domestic distribution.

Authorities have expressed concerns over online addiction and child myopia, spurring games publishers like Tencent and NetEase to put in place play time limits for minors.

With an estimated 70 million readers, China’s online comics market has become one of the latest areas where internet companies are competing against each other to drive user growth with a universe of content including anime, video games and streaming. NetEase and Tencent are the leading players in the field, although they still count on games to generate most of their revenues.

In an interview in June, Dara Luo, marketing director at NetEase Comics, had said that NetEase was looking to expand its online comics content, even though it was not focused on making money immediately.

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Bilibili started off in 2010 as an anime-focused video sharing site, best known for displaying user comments in real-time as streams of floating subtitles on the screen. Now the company is morphing into a provider of licensed content from mobile games to anime to comics.

Last month it launched its own comics app, featuring hit Japanese series including One Piece and Pokemon.

Alibaba is the parent company of the South China Morning Post.

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