Game company T3 takes big stake in HanbitSoft

Could this be a match made in game geek heaven? T3 Entertainment, producer of the dancing avatar computer game “Audition,” said yesterday in a release that it purchased 25 percent of legendary local game publisher HanbitSoft. The deal makes T3 the biggest shareholder in HanbitSoft.

The news has sparked speculation in the flooded Korean gaming industry. For starters, the move could save HanbitSoft, a fallen icon among first-generation online game companies here.

“T3 Entertainment is in good financial status and HanbitSoft knows how to do business in the world of games. This deal will create synergy,” Hong Gina, an analyst with Kyobo Securities, said.

But T3’s reputation also raises questions about the new alliance. The9 Limited, China’s biggest game company, invested 40 billion won ($38 million) in G10 Entertainment, the biggest shareholder of T3, last April. Thus, some industry experts say T3’s deal is another example of a foreign company’s encroachment into the Korean gaming industry.

“HanbitSoft’s total sales were 66.2 billion won last year, and T3 Entertainment’s were 31.7 billion won. How could such a small company obtain HanbitSoft?” an industry official said on condition of anonymity. “The money comes from China and it means the Chinese game maker [The9] wants to expand its business into the Korean game industry.”

As the Korean gaming market nears saturation, many local game companies have suffered financially in the past three years.

HanbitSoft is one key case of this trend. The game distributor opened a new chapter for Korea’s online game industry by obtaining a copyright to distribute the online game “StarCraft,” developed by U.S.-based Blizzard, back in January 1999.

“StarCraft helped Korea become one of the world’s leading e-sports countries. Even now, more than 50 percent of game competitions are all about StarCraft,” said Hong.

HanbitSoft’s heavy dependence on StarCraft, however, led to the company’s demise, she added.

But as the online game industry has rapidly advanced, Blizzard turned to Korea to do business independently in 2007. Thus, HanbitSoft lost one of its great revenue sources. To make matters worse, a series of new HanbitSoft-distributed games such as “Granado Espada” and “Hellgate London” turned out to be big flops.

Other cases include China-based Shanda Interactive Entertainment’s acquisition of Korea’s Actoz Soft in 2004, and Japanese game company Techno Groove’s takeover of the domestic company Gravity in 2005.

Even local game companies NeoWave Inc. and LivePlex targeted their Korean counterpart, Webzen Games, one of the nation’s first-generation game companies, for a hostile merger and acquisition earlier this year.

“The competition is so tough because there are so many game-related companies now,” Hong said. “If they have no competitiveness when it comes to game quality or management policy, they lose ground.”

Despite the fierce competition, Hong maintains a rosy outlook. “Some other first-generation game companies, such as Nexon, NCsoft and Hangame, are doing very well, especially overseas. The entire game industry and a number of game users are constantly increasing,” she said.

By Sung So-young Staff Reporter [so@joongang.co.kr]