Chinese game firm Electronic Soul accelerates overseas expansion by integrating superior resources

Photo taken on Sept. 17, 2021 shows a poster of the Chinese-made game Genshin Impact in a subway station in Shenzhen, south China's Guangdong Province. (Xinhua)

Chinese game developer and publisher Hangzhou Electronic Soul Network Technology Co., Ltd. (Electronic Soul, 603258.SH) announced on May 28 that it planned to purchase the remaining 20 percent shares of Xiamen Youdong Network Technology Co., Ltd. (Youdong Network), another Chinese game developer and operator, with 126 million yuan to integrate superior resources to go global at a faster speed, reported Securities Daily.

Electronic Soul had purchased 80 percent shares of Youdong Network in 2019, and after the completion of the above-mentioned acquisition, Youdong Network will become a wholly-owned subsidiary of Electronic Soul.

From 2019 to 2021, Youdong Network had seen its total net profit attributable to the owners of the parent company after deducting non-recurring gains and losses register respectively 51.6824 million yuan, 69.4088 million yuan and 76.4825 million yuan, all exceeding the performance targets committed to Electronic Soul by its counterparty.

It is reported that in this acquisition, the counterparty promised that the net profit attributable to the owners of the parent company after deducting non-recurring gains and losses of Youdong Network in 2022 and 2023 would not be less than 80 million yuan.

The performance of Youdong Network has grown rapidly in recent years, with the compound growth rate of net profit from 2018 to 2021 reaching 52.89 percent, contributing a lot to Electronic Soul, according to an executive from Electronic Soul.

At present, Electronic Soul is speeding up the layout of overseas research and development (R&D) and distribution, and by further integrating the overseas resource advantages of Youdong Network which has years' of experience in overseas game R&D and operation and boasts good results in overseas business will help enhance the core competitiveness of Electronic Soul, added the executive.

It is learned that Youdong Network has established good cooperative relations with other Chinese game developers like efun, Oasis Games, YOOZOO, Changyou, etc., and some of its products have entered the top 20 of the Google and Apple lists of best sellers in Japan, Vietnam, and Indonesia among others.

According to data analysis company SensorTower, the mobile game "huawu warring states" of Youdong Network ranked among the top 20 Chinese games in Japan in 2021. Youdong Network was also awarded the title of "national key cultural export enterprise in 2021-2022".

The overseas business of Chinese game companies are growing rapidly. In the first quarter of 2022, the actual sales revenue of China's self-developed games in overseas markets reached 4.554 billion U.S. dollars (about 29.6 billion yuan), up 12.06 percent year on year, and in 2021, the figure was 18.013 billion U.S. dollars (about 121.3 billion yuan), up 16.60 percent year on year, according to a report by data research institute CNG.

In recent years, the overseas business of Electronic Soul has gradually formed a scale. Data showed that in 2021, its overseas business had generated a revenue surge of 40.36 percent year on year, becoming an important growth driver of the company.

Besides, from 2019 to 2021, its overseas revenue recorded respectively 56 million yuan, 103 million yuan and 144 million yuan, accounting for 8.07 percent, 10.05 percent and 14.49 percent of the total revenue.

It will invest more in overseas game R&D and product market publicity, and strengthen R&D team reserve layout, according to Electronic Soul.

The overseas revenue of China's self-developed games has maintained a high growth trend, noted the above-mentioned executive from Electronic Soul, adding that taking online games as the carrier embedded with Chinese culture and taking advantage of the internet to break through the global capital and technological barriers is an important way for China to carry out cultural exchanges with others, and the international competitiveness of the game industry is also increasing.

Qian Xiangjin, a professor of the School of Management with Zhejiang University, said that diversified overseas markets have provided large development space for domestic game enterprises, but overseas markets have put forward higher requirements for enterprises' market promotion, overseas operation and R&D capability.

Under the trend of pursuing high-quality products, Chinese companies have gradually changed the strategy of putting more emphasis on marketing than R&D, and in the future, companies adhering to the R&D of high-quality products are expected to build excellent Chinese game brands overseas, Qian added.