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Chinese Capital Flowing into Korean Gaming Market
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Chinese Capital Flowing into Korean Gaming Market
  • By Cho Jin-young
  • March 11, 2016, 02:15
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Korean game developers are continuously taken over by Chinese companies that are armed with large capital.
Korean game developers are continuously taken over by Chinese companies that are armed with large capital.

 

Chinese game producers, which are armed with large capital, are scrambling to push into the Korean market. As they have established strategic partnerships and acquired shares, some raise concerns over whether Korean game developers are continuously taken over by Chinese companies.

NHN Entertainment Corp., the nation’s online game and services provider, announced on March 8 that it is transferring all of its shares in online mobile game company Webzen Inc. to Fun Game, a special purpose company set up by a Chinese game giant Ourpalm. Accordingly, the local Internet giant will hand over a 19.24 percent stake in Webzen for some 200 billion won (US$166.53 million won).

The latest deal will make the Chinese company the second largest shareholder in Webzen. Although its stake is lower than 27.2 percent owned by Webzen founder and Chairman Kim Byung-gwan and affiliated person, Ourpalm has become a strong player that can interfere in the overall management, according to industry sources.

It is nothing new that Chinese gaming companies acquire shares in domestic companies. Tencent, the largest publisher of mobile games in China, is the front-runner in tapping into the South Korean market. It has invested 530 billion won (US$441.3 million) in Netmarble Games, 130 billion won (US$108.24 million) in 4:33 Creative Lab and 20 billion (US$16.65 million) in PATI Games. Tencent has also invested 72 billion won (US$59.95 million) in mobile messenger operator Kakao earlier, becoming the second largest shareholder. 

It is true that many people in the industry inside and out are voicing their concern about Chinese companies’ investment in Korean firms. This is because they are worried about the leak of technology and manpower as well as hostile takeover bids by gradually acquiring shares.

In 2004, then-South Korean PC game developer Actoz Soft, which was sold to Shanda Games of China, was the best example. Actoz Soft has established Eyedentity Mobile later through its physical spin-off. However, some say that don’t be so negative about the inflow of Chinese capital. This is largely due to the fact that Korean game developers cannot attract large investments, which will have a leverage effect, since the domestic investment market itself is small.

Bang Joon-hyuk, head of Netmarble Games, said at the press conference last year, “We needed at least 500 billion won (US$416.32 million) but there was no investor to afford that (in South Korea). So we chose Tencent." Capitalizing on the funding from Tencent, his company has positioned itself as the No. 1 mobile game firm in South Korea.