Chinese online video platform iQiyi has acquired mobile games developer Skymoons for $190 million. This acquisition includes a fixed payment of RMB 1.27 billion as well as a further investment of RMB 730 million depending on Skymoons’ performance in the next two years. According to iQiyi, Skymoons has partnered a number of IP powerhouses with respect to the development and promotion of mobile games, films, anime and comics, such as Three Kingdoms and Journey Of The Flower.
We expect this acquisition to enhance iQiyi’s ability to leverage its own portfolio of video-related IP into the mobile-gaming segment. With increasingly fierce competition among streaming video platforms, spend on exclusive video content – both purchased and created IP – is growing sharply, in order to maintain subscriber bases and attract advertisers. As such, diversifying revenue off the back of a single piece of IP becomes key for maintain profit margins.
Major competitor Tencent Video is focusing on converting key video IP into mobile games. Tencent cooperated with KongZhong to adapt a recent, popular drama Sha Hai into a hardcore mobile RPG title, with a diverse range of such video-to-game conversions in the pipeline. Additionally, Tencent will adapt its popular mobile games to films and anime namely Honor of Kings, Naruto OL and JX Mobile to be streaming exclusively on Tencent Video.
Skymoons established its mobile games business in 2015 via an RPG title based upon a drama series, Journey Of The Flower. It generated monthly gross of RMB 160million and bolstered user subscriptions for iQiyi. The title also kicked off cross-marketing activities between TV series/movies and games in China, outlining the great upside for user uptake and short-term revenue, as the popularity of each media feeds into one another.
This trend occurred in browser-gaming in 2017, where any new, popular titles were mostly adapted from hit TV series. Such games will generate significant revenue when offered in sync with the TV shows themselves, but decline dramatically once the show in question has finished its run. This lesson will need to be kept in mind, when building games based on major new TV shows, and vice versa.