In Acquisition/Investment, China, News

Zapak Strengthens China Ties

Reliance Ad-SSEPT. 29, 2015 • Zapak Mobile Games Private Ltd, a division of India’s Reliance Entertainment, has sealed two agreements to pursue several China-related endeavors. The first saw an Rs 989 million ($15 million) investment by Lead Eastern Investment Co., Ltd. based in Datong, China. The 10% stake is part of a joint venture between the parties to produce mobile games for global release. A second joint venture is specific to China, and will leverage existing Zapak mobile content for that market. Zapak will own 40% of the joint venture, Lead Eastern 51%, and Hong-Kong-based Creative Cultural Operations Ltd will own 9%. Zapak is the leading mobile game company in India, Lead Easter specializes in motion picture and video distribution, while Creative Cultural caters to Chinese media firms looking to license Western IP.

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Impact: Reliance has had global aspirations for quite some time for Zapak. While being at the top of the Indian market is important, gross annual revenue there pales compared to other Asian and Western markets despite yearly growth in the domestic game business. Only around 20% of Reliance’s game revenue comes from India. Neither is the firm shy about acquisitions and investments in companies outside of India. In 2010, Reliance took a 50% share in Codemasters. Three years later, it acquired the gaming division of Funnel Japan, and took a 51% stake in South Korea’s Bluesom Inc. The rationale for the 2013 investments was to buy the relationships with app stores, publishers and IP owners in Japan, Korea, China and Taiwan. At the time, there was talk of acquiring Chinese developers. Chinese regulators frown on foreign acquisitions in favor of joint ventures, however. So now we have the partnership with Lead Eastern and Creative Cultural. The deal is good for Zapak as it open up a conduit to the China market, and good for Lead Eastern, which needs to assimilate game development skills. The joint ventures also make sense given primary competencies of all three firms lie in film and television. Reliance is a heavyweight in motion pictures, television music and sports, including 50% ownership of DreamWorks Studios. Reliance definitely has the necessary worldwide reach and relationships to successfully expand its Zapak brand and game content to China.

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