Shanda Games (Nasdaq: GAME ) has a passport and it's not afraid to use it.
The company behind some of China's most popular multiplayer Internet games is making a stateside push in acquiring California-based Mochi Media in an $80 million cash and stock deal. It's a good move on Shanda's part. Mochi is drawing a sizable audience for its Flash-based online games. With 140 million monthly active users, Mochi's 15,000 browser-based games are clearly resonating in cyberspace.
However, Shanda buying Mochi gets the hypocrisy-o-meter whirling, given recent developments in the world's most populous nation. Chinese gaming stocks have been kept in check in recent months, after regulators began cracking down on game content and foreign ownership.
So is that it? American developers can't buy into Chinese companies, but China's darlings can swallow stateside companies whole?
To be fair, Shanda Games is legally based in the Cayman Islands. Chinese parent Shanda Interactive (Nasdaq: SNDA ) spun it off earlier this year. It seemed like a puzzling IPO at the time, but now seems to make a lot more sense if Shanda Games wants to be a globetrotter. The irony here is that China's Shanda Interactive still has a majority stake in its offshoot. In other words, it still appears to be a one-way street.
This move may open the eyes of Chinese regulators, perhaps unaware of the potential that China's most promising online gaming specialists may find abroad. Just as NetEase.com (Nasdaq: NTES ) had its challenges in reintroducing Activision Blizzard's (Nasdaq: ATVI ) World of Warcraft in China, we may not be too far away from NetEase or Shanda eventually broadening the realm of their multiplayer games around the world.
Regulatory hurdles haven't entirely derailed the industry. Changyou.com (Nasdaq: CYOU ) and Perfect World (Nasdaq: PWRD ) beat analyst profit estimates in their latest quarters. However, Chinese authorities may still want to consider relaxing their grips if they want the industry to turn into a lucrative export.
Are you worried about the future of online gaming in China? Share your thoughts in the comments box below.
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