Beijing-based Zhaomi Group has entered into a strategic partnership with online video game company Kee Ever Bright Decorative Technology to launch a RMB 3 billion (USD360 million) video game M&A fund.

Zhaomi is an Internet technology company founded in 2011 by Chen Yang, who was formerly a lead producer at US gaming major Electronic Arts Inc. The company previously raised a RMB130 million ($18 million) series B round from Fosun Kinzon Capital and Bluerun Ventures. It raised an undisclosed amount of Series C round from online video platform Youku Tudou and Beijing

Their new joint fund aims to raise RMB1 billion ($140 million) for its first close and will target investments in ventures engaged in video games production, development and distribution. According to the companies, the scope of the fund is international in nature and aims to unlock and create value in various companies within the industry through mergers and acquisition (M&A) activity. Speaking on the development, Chen Yang, founder of Zhaomi Group, said, “The global video games industry has a history of over 50 years, and there are many advanced technologies in the world.It is an opportune time to launch a buyout fund targeting the international market.”

 

An SCMP report notes that China was set to emerge as the largest video game market as of 2016, with mobile gaming likely to become the most lucrative segment of the video gaming sector. Chinas’ mobile gaming sector was predicted to reach $10 billion by the end of 2016, a 41 percent increase from 2015’s $7.1 billion, with the Global Games Market Report suggesting: “China will remain the largest games market for the foreseeable future, growing to US$28.9 billion by 2019.” As at 2016, China’s video game market in China was estimated to have a market capitalization of RMB165 billion ($24 billion), with $28 billion worth of M&A transaction value recorded in the industry last year.

The largest deal was Tencent Holdings Ltd’s $8.6 billion acquisition of Finland-based mobile game development firm Supercell. This acquisition, which placed Tencent in a highly dominant market position on a global basis, has also positioned China to leverage on its cultural export to build its soft power, given that Beijing has been subsidizing artistic enterprises in a bid to build its cultural capital internationally.

China’s gaming market A Forbes column notes that China’s video gaming market is maturing, with its mobile games segment “staking an increasingly significant claim on the overall digital games market in China for several years” though online PC gaming is still the leading segment as of 2016 and generates triple the revenue of mobile gaming. However, as at April 2016, mobile games apparently account for nearly 40 per cent of China’s total digital games revenue, with analytics firm DataEye placing total revenues in mobile gaming at $7.94 billion, including revenue from exported games. Research

A Forbes column notes that China’s video gaming market is maturing, with its mobile games segment “staking an increasingly significant claim on the overall digital games market in China for several years” though online PC gaming is still the leading segment as of 2016 and generates triple the revenue of mobile gaming. However, as at April 2016, mobile games apparently account for nearly 40 percent of China’s total digital games revenue, with analytics firm DataEye placing total revenues in mobile gaming at $7.94 billion, including revenue from exported games. Research

The key factor is the rapid growth of mobile gaming, which in 2012 accounting for 5.4 per cent of all gaming in China but has grown to account for 36.6 percent of all gaming in 2015. While this expansion will slow over time, the market structure of its video gaming industry is likely to see consolidation as revenue continues to climb annually. This will see further consolidation among Chinese mobile game developers, in addition to increasing costs for R&D, distribution and IP rights due to demand for compelling gaming content rise.

First seen at: Dealstreetasia, Chinamoneynetwork

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