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A Cryptic Chinese

June 1, 2011

So yesterday came the news that Perfect World acquires Cryptic Studios. That is a quite interesting move I think and kind of makes sense; a big Asian MMO developer looking to expand into potentially lucrative Western market. They already have their own subsidiaries in US and Europe (and Japan), but that seems mainly so far being about bringing the Asian-developed games to both sides of the Atlantic.

Perfect World itself is a quite large company in this area; over 4000 employees. It is also a public company and registered on NASDAQ, so financial results and information is available. From their recent report on Q1 2011 results, it seems their revenue for that quarter was around 110 million USD and with a profit of 43.8 million USD. That is a huge amount of profit in relation to the revenue – they are doing quite well. The cost of buying Cryptic is just a bit more than the profit for one quarter.

About 10% of their revenue comes from outside their home market in China. This is a bit smaller proportions than NCSoft, but both of them have in common that a huge majority of their income is from the Asian market. Just as NCSoft seem to let ArenaNet and Paragon Studios do their own thing I do not think there is much fear for Perfect World to make Champions into Jade Dynasty-with-spandex or Star Trek Online to Forsaken World-with-pew-pew.

If anything I think we may see more art assets (customes, ship interiors & exteriors etc) since there is likely a lot of staff available for this. As far as I know it has already been common practice in Western companies to outsource some of that kind of work to low cost countries anyway.

And we may need to switch virtual currency from Atari tokens to Zens. To me it seems that Perfect World has the potential to be a better place for Cryptic than Atari, but cultural differences can be a challenge.

If this works out well I wonder if we will see more Asian online game companies buying into Western ones who has their own tech/assets?

  1. June 1, 2011 at 15:12

    I had only a very vague idea of who Perfect World was before yesterday, but I came to the same conclusions as you after doing some reading. I hadn’t actually though of Cryptic’s purchase price in terms of their quarterly revenue, but that does say a lot about PW’s confidence in the deal.

  2. SKapusniak
    June 1, 2011 at 18:29

    When I heard the news that Cryptic was up for sale, of the (few) potential buyers I could think of, Perfect World seemed to be the most obvious and sensible fit to me, given the fact they that picked up Runic (makers of Torchlight) last year and looked to be wanting to push more strongly into the Western market.

    I think there’s quite a lot of potential for it work out pretty well, and not just the usual potential for everything all go hideously wrong 🙂

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