FL Mobile represents a substantial high-growth opportunity for NQ Mobile. We’d like to take this opportunity to talk a bit more about this subsidiary and how it fits into the burgeoning mobile gaming market.
Yesterday in Shanghai, China, NQ Mobile’s gaming subsidiary FL Mobile announced two major deals for exclusive distribution of highly anticipated titles at the China Joy Gaming Conference.
First, the company will be the exclusive distributor for the latest game from Mokylin Group, a top developer whose exceptional titles drive approximately 100 million RMB per month in revenue. FL Mobile will be distributing their newest title, “Long Qi Zhan Ge,” throughout Mainland China, Taiwan, Macau and Korea.
Second, FL mobile signed a deal to be the exclusive distributor of the mobile game adaptation of a popular web-based fiction series. The mobile game is expected to be released in 2015 in tandem with the film adaptation of the series, which will be directed by Mr. Yu Zheng with DongyangHuanyu Studio Entertainment Co. Ltd.
Games are an extremely important part of the mobile ecosystem, as they are the biggest growth driver for both Android and iOS apps. According to the App Annie Index for Q1 2014, China is currently the fastest growing market for iOS apps, with games making up the majority of that growth. Social Networking apps also made a significant contribution, a fact that speaks to the increased value that FL Mobile’s community-based approach conveys.
FL mobile’s business model is based on publishing and operating mobile games and associated communities, primarily on behalf of third-party developers including Tencent, Baidu, Perfect World, Muhe Network, HardCore, Red Infinity, Tianjin Pictographic and 37 Interactive. Many games published by FL Mobile are exclusive to the company.
As of December 31, 2013, FL Mobile operated and distributed 20 iOS and 69 Android games and had over 106.9 million cumulative registered user accounts (up from 67.4 million in 2012) and 20.4 million average monthly active user accounts (up from 12.5 million in 2012). During 2013 alone, these games generated $20.7 million in revenue. This does not include additional revenue the subsidiary drives through advertising and promotions.
According to the Q1 2014 China Mobile Games Market Report published by Eguan with data from EnfodeskAnalysys International, FL Mobile has the second largest market share on the iOS platform, with 15.2% of total market share. Combining iOS and Android, the company maintains a 10.3% share of the gaming market.
Fully grasping the value FL Mobile brings to NQ requires some understanding of the mobile games market and the role that FL plays in it. While it’s not impossible for a game developer to publish a game themselves, the task is resource intensive and generally outside a developer’s area of expertise. It’s a bit like writing a book. You could self-publish, but the money, time and energy requirements plus the opportunity costs make this option less than desirable. This is a major reason why both book authors and game developers enlist publishers to help get their work distributed and publicized.
The need for a publisher becomes even greater in the Chinese mobile market, which is larger and more complex than its US counterpart. While there is huge success potential, self-publishing comes with even bigger entry barriers. In short, companies who want to succeed in China choose FL Mobile for their localization and publishing needs.
It’s also important to note that the Chinese app market landscape is not at all like that in the US, where there is a single dominant store for each leading operating system. In China, most Android phones don’t come with Google Play pre-installed and the iTunes market offers neither the breadth of options nor the superior experience that it does elsewhere in the world. In the absence of dominant players, app stores are frequently managed by search engine providers and portals (e.g., Qihu, Tencent and Baidu) as well as by manufacturers, carriers and a host of other third-party businesses. Another departure from the way of doing things in the US is the method of installing apps. Frequently, searching for an app leads to a link or QR code that the user follows in order to download an APK to his or her PC, prior to installing the app on their smartphone.
http://www.chinainternetwatch.com/7815/china-mobile-app-distribution/
FL Mobile distributes games through most of China’s largest and most reputable app markets, including:
- 91 Wireless: At the time the largest deal in the history of the Chinese Internet, 91 Wireless was acquired by Baidu in 2013 for $1.9 billion. Baidu has now announced plans to consolidate this market with its Duokoo mobile download service (also a point of distribution for FL Mobile) to establish an integrated mobile gaming platform.
- 360 (Qihoo): The premier Android app store in China, 360 has over 275 million active users and a rapid monthly growth rate.
- UCWeb: In June, Alibaba, already an investor in the company, announced they will acquire the remaining shares in a deal which has overtaken the 91 Wireless acquisition as the biggest deal in the Chinese internet sector.
- AnZhi: Formerly GoAPK.com, this is one of China’s oldest Android markets. Backed by Shanda Games, this store remains one of the strongest for games in the region.
Games published by FL Mobile are also available through major manufacturers such as Oppo, Huawei, Lenovo and Xiaomi. These manufacturers also have developed their own app markets that mobile users can use to download apps from many different developers including FL Mobile. For example, Xiaomi’s MIUI App Store reported 1 billion downloads in just over a year of operation, and a download rate of 5 million per day.
We hope this sheds some light on FL Mobile’s business and the important value and substantial growth potential that this subsidiary offers to NQ Mobile.
Until the next update, please e-mail questions to investors@nq.com. Please note that e-mail is preferred for your questions and comments.
Regards,
NQ Mobile IR