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NetEase turns to ‘Harry Potter’ and ‘Lord of the Rings’ games in global push after Hong Kong listing – CNBC

NetEase Games logo is seen above the company’s booth one day before the 2019 China Digital Entertainment Expo & Conference (ChinaJoy) at Shanghai New International Expo Center on August 1, 2019 in Shanghai, China.

VCG | Getty Images

Fresh off the back of its secondary listing in Hong Kong, Chinese gaming firm NetEase is aggressively pursuing international expansion using big name franchises to appeal to a global audience. 

NetEase, China’s second-largest gaming company behind Tencent, announced earlier this week it’s developing a mobile game called “The Lord of the Rings: Rise to War” based on J.R.R. Tolkien’s epic set in Middle Earth.

The game is another major collaboration between Warner Bros. Interactive Entertainment and NetEase after last year unveiling “Harry Potter: Magic Awakened.”

Big name franchises and partnerships with major brand owners underscore one part of NetEase’s global strategy. 

“For NetEase, our globalization strategy is powered by strong in-house R&D capabilities, while partnerships with world-famous IP (intellectual property) powerhouses not only further enhance this strength, but also contribute to our ambition to deliver more popular titles in the global markets,” the company said in a statement to CNBC.

For major brands, partnering with NetEase also allows them to monetize their franchises in China, one of the world’s largest gaming market. 

Investments ahead

NetEase raised $21.09 billion Hong Kong dollars through its secondary listing in Hong Kong, with much of that money earmarked to boost international expansion. 

Some of that money will likely go toward investments in gaming companies. 

“We think minority investments are most beneficial to our portfolio companies at this point. With each minority investment, we offer both the vast resources of NetEase as an established developer and the creative freedom to keep working on whatever they are most passionate about,” NetEase told CNBC.

The company has already taken stakes in companies such as American software development company Niantic, which makes “Pokemon Go” and Canadian games developer Behaviour Interactive. 

Taking minority stakes in companies is different to Tencent, which has often taken large and sometimes majority ownership of smaller firms. 

Analysts said the recent fundraising will give NetEase the money required to carry out this strategy.

“I think the recent capital raise in Hong Kong gives NetEase more fire power to start buying stakes in other gaming companies. This has been a recipe for success for larger gaming giant Tencent … and one that NetEase could replicate,” Neil Campling, head of technology, media and telecoms research at London-based Mirabaud Securities, told CNBC.



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