According to a Marketwatch report citing official government newspaper the Shanghai Securities News, publisher Electronic Arts is to take a 19% stake in China's NASDAQ-traded MMO firm The9, best known for distributing
World Of Warcraft in that territory.
The report indicates that The9 will also distribute EA's online title
FIFA Online, already a major success in South Korea, in the territory. It appears that EA has had some difficulty in gaining distribution for the game due to regulatory issues - Gamasutra's
interview with then EA China boss Erick Hachenburg saying he was "looking seriously" at how to debut the title in China.
Thus, a minority stake in The9 would help EA smooth the Chinese government-related problems that have stopped many Western companies in making progress in the country. However, it does raise interesting questions regarding
World Of Warcraft's continuing distribution by The9, since the Vivendi/Blizzard created game currently accounts for 99% of the company's revenues.
The9 has also
licensed Webzen's MMO Huxley for the Chinese market, and
a recent 'The China Angle' column on Gamasutra noted: "Currently, The9 has NCsoft's
Guild Wars in open beta testing and Webzen's
Soul of The Ultimate Nation (SUN) in closed beta testing.
Huxley and [the recently announced
Ragnarok Online 2] add to a strong pipeline that also includes Flagship Studio's
Hellgate: London."
Shanghai-based MMO executive Bill Bishop
points out in some detailed analysis on his weblog: "EA and Vivendi Universal Games (owners of Blizzard, developer of World of Warcraft) are direct competitors. Perhaps the Blizzard-The9 contract does not have any protection for Vivendi in the event that a competitor takes a significant stake in The9, but that would be surprising."
He continues by speculating: "The new President of EA Asia, Hubert Larenaudie, was previously President of Vivendi Universal Games Asia, so if there are any loopholes in the Blizzard-The9 contract he would know where to find them. In addition, EA's new head of China Corporate Development was previously an executive at The9."
Bishop also notes by way of a conclusion: "EA has aggressive plans to license its upcoming
Warhammer [Online] MMORPG into China. They have notified several operators in China of the planned evaluation and bidding process, and a strategic deal with The9 would likely alter those plans. EA's hopes the
Warhammer MMORPG will be a credible competitor to
World of Warcraft, and it would be strange to have the same company running both in China."
Nonetheless, it is possible that The9, which such a diverse set of licensees, could run its individual game operations separately, and the company's NASDAQ-traded stock has taken a massive jump in early U.S. trading, up around 10% to $38.79.
Thus far, Electronic Arts has officially denied that a deal with The9 has yet been signed, though it has not denied the speculation that a deal is forthcoming.
[UPDATE: Wedbush Morgan Securities analyst Michael Pachter has offered comments on the report, noting that the firm views the stake in the company as "as positive for EA," though Wedbush officials "do not believe it will materially affect earnings near-term."
Given EA's "significant recent investments" in online games, particularly
last year's acquisition of Mythic Entertainment for $76 million, Pachter added, "We believe that online games represent a significant opportunity for EA. We also believe that EA intends to make further investments in the online game space, including a potential tender for the remaining shares of The9 at some point in the future."
Continuing, Pachter commented: "Given EA's minority ownership of Ubisoft and The9, we remain skeptical that the company intends to make further acquisitions of public companies over the foreseeable future. We think that if the company were to choose to consolidate the industry, it would be fully occupied completing the acquisitions of either Ubisoft or The9, and do not believe that it is considering M&A activity with other public companies."]
