Demonstrating the increasingly confused nature of the Chinese games industry, Perfect World has made a move on rival Shanda Games.
This situation is particularly complex as Shanda Games (NASDAQ: GAME) is currently considering a proposal from its controlling shareholder Shanda Interactive and a Chinese investor to take the NASDAQ-listed company private.
Hence, one element of the deal will see Perfect World (NASDAQ: PWRD) join this group, making the $1.9 billion-valued deal likely to be approved by Shanda Games’ board.
This is because the other part of the deal sees a Shanda Interactive subsidiary selling shares worth $100 million to Perfect World.
Behind the scenes
The move comes as the the majority web/MMOG Chinese games market is transitioning to mobile and tablet hardware.
This is creating massive opportunities for pure mobile start-ups such as LocoJoy and Digital Cloud, while once PC-focused developers such as LineKong are now just focused on mobile.
The situation is more difficult for the larger PC publishers, however, which are trying to manage this revolution while balancing an increase in internal investment with the potential of a sharp decline in revenues.
In that context, Shanda Games - which has experienced mobile success publishing Square Enix’s Million Arthur in China - is a good match for Perfect World, which is earlier in terms of getting into mobile games.
In 2013, Shanda Games had annual sales of $713 million, down 8 percent, while Perfect World’s annual sales were $504 million, up 10 percent.