For Bigpoint GmbH, a South Korean version of its popular “Drakensang Online” game is a first step to enter the Asian market with dragons and magicians.
Bigpoint, the Hamburg-based company with more than 330 million registered players, is the first western games company to team up with Korean market leader NHN Corp. (035420), said Bigpoint Managing Director Khaled Helioui, who’s attending the Gamescom trade fair in Cologne, which starts today. Bigpoint plans a similar tie-up in China by December, he said.
“South Korea is probably the most demanding country as professional gaming is part of the national culture,” he said in an interview this month. “TV is showing gaming matches and the best teams have fan bases of millions of people.”
Bigpoint offers free games and makes money by selling virtual goods such as better weapons, which attract about 10 percent of its active users. Since Helioui became managing director in February, he has been driving expansion abroad to establish Bigpoint “as the international destination of reference in online gaming” to gain an advantage over Zynga Inc. (ZNGA:US) of the U.S. and Karlsruhe, Germany-based Gameforge AG.
The 30-year-old, who got into gaming at the age of four when his father gave him a console, estimates South Korea’s online games industry is worth more than $4 billion in annual revenue, about four times the German market.
In China, mobile gamers will rise 30 percent to 280 million this year, while there are only about 1 million users of black-market consoles from vendors such as Nintendo Co. (7974), Sony Corp. (6758) and Microsoft Corp. (MSFT:US), according Analysys International estimates.
Bigpoint was reluctant to enter the Asian market in the past partly because it was “too far away, not a focus” and it was “complicated to work with Korean and Chinese companies with our existing portfolio back then,” said Helioui, who holds French and Tunisian passports. “But when I joined Bigpoint, considering the success and quality of ‘Drakensang,’ the size of these markets and the fact that I had already built a strong network in China and Korea, I was convinced we had a strong shot at building a presence there.”
“Drakensang,” in which players take on the role of warriors fighting evil dragons and monsters, has graphics and depth of gameplay that exceed those of local games of the “hack-and-slash” genre, Helioui said.
China has banned gaming consoles for 13 years to shelter its youth from the violence of video games. Gamers have found ways to ignore that ban by playing free online games and increasingly by migrating to mobile devices.
Bigpoint has been working on a partnership with one of the industry leaders in China, a market worth about $12 billion a year, according to Helioui.
“Hopefully we will have regulatory approval before the end of the year to start another localized version of ‘Drakensang,’” he said.
Bigpoint, which has popular titles such as “Battlestar Galactica” and “Farmerama” in its portfolio, also plans to expand into publishing games created by other companies.
“We are going to allow third-party studios to connect to the Bigpoint world, to our services to make their games more successful, as it is not enough to build your own unique games,” Helioui said.
In Europe, Bigpoint is teaming up with the British Broadcasting Corp. to publish a game modeled after TV show “Dancing With the Stars,” potentially providing the broadcaster with ways to localize the game, payment systems and community management.
“We have six other publishing deals that have been signed and more than 15 to 20 in the pipeline,” Helioui said. “In the mid-term I expect the publishing part to be as big or even bigger in terms of sales than our own games.”
Helioui is scheduled to present a military-themed multiplayer online battle arena, or MOBA, game called “Merc Elite” at Gamescom. Bigpoint plans to increase its workforce in Hamburg and Berlin from about 700 after shedding 120 jobs last year, he said, declining to discuss details.
Before joining Bigpoint in July 2012 as chief games officer, Helioui had worked for Boston-based private equity firm TA Associates from 2009, helping to broker the company’s investment in Bigpoint in 2011.
In April that year, TA joined Summit Partners, another Boston-based private equity firm, to buy a majority stake in Bigpoint for $350 million. TA and Summit aren’t in a rush to sell their holding, Helioui said.
“Private equity firms like TA and Summit don’t expect a return on equity within two years, the average ‘hold’ is five to six years, some even 10 to 12 years,” he said, adding that an initial public offering is not an issue at the moment.
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