The9 Limited (ADR) (NASDAQ:NCTY) recently announced about its transaction with Smilegate Entertainment, Inc. The deal is finalized between The9 Limited’s joint venture, Oriental Shiny Star Limited, and Smilegate so as to acquire an exclusive license for Cross Fire 2 in China. After the completion of this deal, The9 Limited will have legal license to publish as well as operate the Cross Fire 2 game for duration of 5 years in Dragon.
About the Deal
To access the complete rights of an exclusive license, Oriental Shiny Star Limited will make a payment of $50 million upfront. Thereafter, $450 million will be paid to the Korean game developer, Smilegate after the former achieves certain operational and development milestones. In case the future sales move in line with the target, the Oriental Shiny Star Limited will also pay royalties to Smilegate.
Benefit of the deal to The9 Limited
Cross Fire 2 is one of the most celebrated and promising PC online game in mainland China. It is the sequel to a blockbuster game Cross Fire. The game is available online and can be played on the first-person-shooter basis. Smilegate is the developer of both these popular PC games. As far as Cross Fire 2 is concerned, it is developed with the help of new game engine. Cross Fire 2 offers an extensive gaming experience to users through PVE game mode.
The deal is most likely to benefit The9 due to its extensive popularity and demand in China. Most of the equity of Oriental Shiny is owned by System Link Corporation Limited. The latter will be operating Firefall in China through PRC consolidated subsidiaries.
The entire deal will offer blanket-benefit to the JVs and subsidiaries of The9 Limited (ADR) (NASDAQ:NCTY) due to a strong foothold in the Chinese market. It must be noted that the game industry in China will have a compounded annual growth rate of the sales income shall reach 15.4% in 2015-2019, according to the IDC study. Therefore, a strong grip in this industry can provide an advantage to the gaming companies in China.