[photopress:it_shanda.jpg,full,alignright]Chen Tianqiao, chairman of Shanda Interactive Entertainment, has methodically held monthly meetings with other Chinese online game companies, looking for potential acquisition targets. It bought Chengdu-based Aurora Technology Development last year. Nothing since then.
On the one hand companies such as Netease, NetDragon, PerfectWorld, and Ztgame made huge windfalls in successive market listings and want to spend the money on acquisitions. On the other hand are the smaller gaming companies who think they are worth much more than the larger companies are willing to pay.
According to one former employee of Shanda, the company paid a massive premium in the acquisition of Aurora so as to raise the threshold for its competitors seeking to close their own deals.
At the Chinese online game providers’ annual conference, one company head said its online games had 60,000 registered users, and that he was there to find investors. Yet there has been little or no action.
Ye Youzhong, CEO of Kaixin Investments, said that online game companies had recently overvalued themselves by over tenfold. He said that if bought for a price of 12-15 times their real value, it would take a full three years — including the market listing process — before the investing company saw any profit.
iResearch Consulting Group, which focuses on online media market research, recently released a report showing that 80% of the market share of Chinese online games have been dominated by ten big companies. Many game developers were basically struggling to survive, and risked going under if they failed to find investment. In the end, they will probably find it. But not at the price they are currently asking.