Tencent Holdings Ltd. (700), China’s biggest Internet company, set up a licensing agreement with Vivendi SA (VIV)’s Activision Blizzard Inc. (ATVI:US) video-game unit to win players in the world’s biggest online market.
The companies will offer Activision’s “Call of Duty” for online users in China, according to information on the Chinese company’s website yesterday.
The agreement marks a significant expansion for “Call of Duty.” The game is expected to be competitive with Tencent’s top-selling title “Crossfire,” which generates about $1 billion in sales annually for the company, Michael Pachter, a Los Angeles-based analyst for Wedbush Securities Inc., said.
“My guess is that it will ramp up to $500 million in annualized revenue at the end of its first full year,” Pachter said in telephone interview yesterday.
Tencent is boosting sales of online games in China and overseas markets such as South Korea, helped by acquisitions including last year’s takeover of U.S. studio Riot Games Inc. The Shenzhen, China-based company is the second-best performer in Hong Kong’s benchmark Hang Seng Index (HSI) this year as it diversifies into services for smartphone users and e-commerce.
Vivendi, which also owns Universal Music Group and phone divisions in France, Morocco and Brazil, has decided to seek a buyer for its stake in Activision Blizzard, a person with knowledge of the situation said last week. Activision, based in Santa Monica, California, licenses games including “World of Warcraft” to NetEase Inc., China’s second-biggest online games company.
“We think China is one of the most exciting places in the world for us to grow our business and to develop innovative new games,” Bobby Kotick, chief executive officer of Activision, said in yesterday’s statement.
Activision increased (ATVI:US) 4.3 percent to $12.46 at the close in New York yesterday. Vivendi fell 0.4 percent to 14.87 euros in Paris trading yesterday. Tencent rose 2.7 percent to close at HK$232 in Hong Kong yesterday before the announcement, valuing the company at HK$427.8 billion ($55 billion).
Tencent has this year outperformed the stocks of Chinese Internet rivals including Baidu Inc. (BIDU:US), China’s biggest search- engine company, and NetEase Inc. (NTES:US), the second-biggest domestic online games operator.
Tencent accounted for 43.6 percent of China’s online game market by revenue in the first quarter, according to a May 24 report by BOCOM International. NetEase followed with a 15 percent market share, according to the report.
Tencent’s “League of Legends” game is the most popular title in South Korea with a market share of 21 percent, according to a May 12 report by Barclays Capital. The Chinese company last year paid $231.5 million in cash, in addition to stock options, for 70 percent of Riot Games, the developer of “League of Legends.”
Last month, Tencent said it agreed to buy a minority stake in U.S. gamemaker Epic Games, developer of “Gears of War” and “Infinity Blade.”
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