Hong-Kong listed game developer acquires VR startup

HK-listed Chinese video game developer Forgame Holdings has acquired the virtual reality startup Beijing Xigua Huyu Entertainment Technology in an effort to ramp up their digital entertainment offerings and expand their product line.

Forgame acquired Xigua – which was founded in 2015 - through purchasing a 69.85 percent stake in the company for 150 million yuan (US$21.8 million).

Xigua primarily develops large-space VR technology and they currently operate around 100 "Player No. 1" Virtual arcades across the country.

The virtual arcades take up mostly between 150 and 200 square meters of floor space and can be found in entertainment and shopping districts in major cities like Shanghai, Beijing, Chongqing, and Hangzhou, though some are in smaller towns.

The facilities are primarily managed by the company with many of them being housed in shopping malls. There are some roadside outlets too, and others can be found in traditional gaming arcades.

Xigua plans on expanding their VR arcade network by opening up more outlets – aiming for over 350 by the end of the year.

Forgame is a Chinese game developer founded in 2009 that focuses more on simpler, easy-to-play games.

The company entered the stock market when it was listed on the Hong Kong Stock Exchange in 2013. The shares in the company grew massively after announcing their acquisition. As profit margins for browser games go down, investors saw Forgame purchasing a VR player as a good gambit to further develop and supplement their gaming business.

Wang Dongfent, the chairman, CEO, and co-founder of Forgame, said that the acquisition was prompted by Forgame's expectations of the VR market in the coming years in China and the wider Asia-Pacific region.

Wang observed that a new era arrives in the video game industry every decade; a new era marked by a major technological trend. Each era brings with it one opportunity for big business. He believes that VR will be the defining technology and major source of business operations for content and game industries in the next era.

There are currently no large pools of VR hardware and technology in China yet. The market as a whole remains underdeveloped in China. That's why, Wang believes, a VR company that has a lot of power in hardware development and distribution, as well as content development, along with a viable business model, is of great importance.

This was the reason his company valued Xigua so much and were so determined to manage their Player No. 1 VR arcades, he explained.

Xigua has developed Infinite Multi-Target Position System (IMPS) technology that allows users to find and locate several targets in a large VR space. These large-scale VR games aren't constrained by barriers or data transmission cables, and they are designed to provide players with unparalleled levels of interactivity and immersion.

Given that the majority of customers in Player No. 1 arcades are aged between 20 and 35, the company aims to find new revenue sources as well as admission fees by using the arcades to sell VR devices and content aimed at that age group.

Wang also mentioned a plan to transform the arcades into a chain of movie theaters offering next generation digital entertainment and content on top of their standard VR gaming experience.

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