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Chapter 365, Part 0352: [Entering the European Market]

"Hello, Mr. Chen."

"Hello, Mr. Rosner. Please have a seat."

The visitor was very young, only in his early 30s, but he was the co-founder and CEO of Gameforge.

This company was officially founded in 2003, when both founders were still university students.

Before founding the company, they had already created a browser game in their dormitory—the pioneer of war strategy browser games, "Galaxy Empire".

Later, by distributing the Korean game "Silkroad Online", they expanded their business from Germany to other European countries.

In two years, they plan to expand into North America.

The game that enabled this expansion is none other than "Mercenaries World" from China!
It's the famous online novel "Mercenary's World," and the game adapted from that novel was distributed by Gameforge to more than 40 countries worldwide.

Alexander Rosner said, "I studied the materials from Game Science carefully and felt a great affinity for Mr. Chen. We both developed games and started companies while in university. My company is called Game Forge, and your company is called Game Science."

"Come to think of it, it does look somewhat similar, and I feel a sense of familiarity with it," Chen Guiliang said with a smile.

Alexander said, "The gaming industry needs young people; those old fogies will be thrown into the dustbin of history. Two years ago, all the game companies in Europe thought that free-to-play games had no market. But we resolutely took over the agency of a Korean free-to-play game, which caused a sensation in various European countries."

Chen Guiliang said, "Free-to-play games are a market trend."

Alexander laughed and said, "The real purpose of my trip to Asia is to investigate 'DNF'. I also came to China to take a look, because a Chinese company is distributing our 'Galaxy Empire'."

"Really? The agents must be terrible, right? I've never heard of them," Chen Guiliang said.

Alexander asked, "Does Youke Platform want to distribute 'Galaxy Empire'? We are considering changing distributors."

Chen Guiliang countered, "Which Chinese company is distributing this game?"

Alexander said, "The Magic City Vilai Technology Company owns a web game platform called Vera."

“I know this platform,” Chen Guiliang said.

Vera platform rose rapidly in the Chinese gaming industry by distributing the German browser game "Clash of Clans". Then, it became obsessed with distributing foreign browser games and developing its own games by imitating them (reskinning them).

This year, with the increasing number of companies developing web games in China, Vera's platform has been severely impacted and is somewhat disoriented.

The games under their umbrella are too homogeneous.

The game "Galaxy Empire," which was distributed by the company at the end of last year, is clearly a pioneering game in the industry, but players mistakenly thought it was a low-quality reskinned game.

No wonder their grades are bad!

Chen Guiliang said, "Foundation Empire is indeed a good game, but it's too old. Even if you keep updating it, it still can't shake off its outdated feel. I'm very sorry, Youke will not be distributing it."

“That’s a pity,” Alexander said. “Let’s talk about Future Era. I’m a bit unsure right now, whether to distribute DNF or Future Era. You need to convince me. What are your advantages?”

Chen Guiliang asked with a smile, "Is the price of 'DNF' very expensive?"

Alexander did not answer.

Chen Guiliang continued, "The developers of DNF also came to China to promote the game. At that time, there were twenty or thirty Chinese companies that wanted to distribute it, but the Koreans raised prices on the spot, went back on their word time, and had no basic integrity whatsoever! There is a Chinese proverb, 'A leopard can't change its spots.' I guess the Koreans were much the same when they negotiated with you."

Alexander said, "Please don't mention Korean companies; you only need to explain the advantages of 'Future Era'."

Chen Guiliang said, "I don't think it's necessary to elaborate on the quality of the game content. Mr. Rosner, you yourself started by developing your own games and then grew your business by distributing free-to-play games. After you've played 'DNF' and 'Future Era,' you can judge for yourself which game is better. What we should be discussing now is the content of the distribution agreement."

Alexander laughed and said, "You're very confident."

“You know, it’s hard for college students to succeed in starting a business if they don’t have confidence,” Chen Guiliang blinked. “I haven’t even graduated yet.”

Alexander said, "Actually, you could have dropped out of school; that's what I did. I want the agency rights for the entire European market!"

Chen Guiliang said, "Okay."

Alexander said, "Distributing Asian games in Europe requires multilingual localization capabilities and integrating Europe's chaotic payment methods. These are all things we can handle, but they are very troublesome, so we need to increase the revenue share for games."

"What percentage?" Chen Guiliang asked.

Alexander said, "85%."

Chen Guiliang said, "Game developers usually get 30%, with a fluctuation of no more than 10%. You're only giving developers 15%, isn't that too little?"

Alexander said, "There are very few free-to-play game agencies in Europe, and we are the most successful company."

“The more successful you become, the more people will want to replicate that success,” Chen Guiliang said. “Aren’t you afraid that some European company will surpass you by distributing ‘Future Era’? You should know that you are just a new company, and you are not as good as those established companies in terms of resources and experience.”

Alexander laughed and said, "Those established companies have rigid systems. They can even argue for a year or two about whether to distribute free games. And other smaller companies don't have the ability to distribute games all over Europe."

“Three years ago, you didn’t have the capability to act as agents throughout Europe, but you’ve done it now, haven’t you?” Chen Guiliang said. “If you’re only offering a 15% cut, then I’m very sorry, we can stop talking now.”

Alexander asked, "How many do you want?"

Chen Guiliang said, "30%."

Alexander shook his head: "Too much."

Chen Guiliang said, "The licensing fee can be reduced a bit." Alexander asked, "How much is the licensing fee?"

Chen Guiliang said, "US$350 million."

"Too expensive."

"It's not expensive. $350 million is the licensing fee for the entire European market."

"The licensing fee is $250 million, and the developer receives 20% of it."

"Okay, the licensing agreement will only be for two years."

"Are you kidding me? If you only grant a two-year license, and we make 'Future Era' a hit in Europe, you'll just transfer the distribution rights to another company?"

"You know you're telling a joke? The conditions you offered are a joke!"

"Can 'Future Age' compare to 'World of Warcraft'? Blizzard only gets 22% of the Chinese market!"

"But Blizzard has attached conditions: The9 needs to pay a $13 million licensing fee and spend $70 million to build an independent data center."

"..."

Agency fees are highly variable and depend on which party has more power and the local gaming environment.

Take World of Warcraft for example.

This game is very strong, so why did Blizzard agree to only take 22% of the revenue?

Given the gaming environment in China at the time, the primary goal was to have stable servers. And the number of companies in China that could afford to spend $7000 million to build a dedicated server room could be counted on one hand.

Once the agency agreement expires, Blizzard will definitely raise prices.

So World of Warcraft was later snatched away by NetEase because NetEase was willing to give Blizzard a 55% cut.

It increased directly from 22% to 55%!

Chen Guiliang could certainly learn from Blizzard and license the product at a low price first, then raise the price once it becomes popular. The problem is that the Germans' offer is far too low.

But Alexander also felt that he hadn't tried to lower the price, because that was the price of Perfect World in Europe.

Previously, the only popular free-to-play online game in Europe was Silkroad Online, distributed by Gameforge. The sudden emergence of Perfect World, a game distributed by the British, put immense pressure on Gameforge.

Alexander came to discuss the distribution of "Future Era" in order to regain Europe and compete with "Perfect World".

Unable to reach an agreement immediately, both sides decided to temporarily suspend the talks.

Chen Guiliang went to an empty room, took out his phone and called Chi Yufeng: "Mr. Chi, is the European agency fee for 'Perfect World' very low?"

Chi Yufeng was silent for a moment, but decided to tell the truth: "It is a bit low. So I plan to open a branch in Europe and take back the agency rights for 'Perfect World'. Damn it, the Europeans are driving the price down too hard. Were you also pressured to lower the price by them?"

“Yes,” Chen Guiliang laughed angrily, “they only offered me 15% of the profits right off the bat.”

Chi Yufeng laughed and said, "Haha, I did about the same thing. I haggled for a month and finally settled on 18%, but I asked for a little more in the licensing fee. I have an idea for you."

Chen Guiliang said, "Go ahead."

Chi Yufeng said, "We can earn a little less now and shorten the licensing agreement. Once the European distributor has established the game's reputation, we can renegotiate the price when the agreement expires!"

“They were unwilling and insisted on signing me a five-year contract,” Chen Guiliang said.

Chi Yufeng said, "That would be difficult. Perfect World was signed for three years. I guess the British weren't sure at the time, which is why they were willing to sign a shorter contract."

Chen Guiliang said, "This time, I was talking to a German. He started his own business as a college student, and was the first company to distribute free online games in Europe."

Chi Yufeng said, "These kinds of negotiating partners are not easy to deal with. Hmm... no, that's not quite right. As long as the game quality is good enough, it's actually easier to negotiate. Because they know their stuff!"

Meanwhile, Alexander was also on the phone.

"Are the Koreans still unwilling to lower the price?"

"I heard we're in talks with the developers of 'Future Era,' and the Koreans are willing to lower the price a bit. They're offering a $500 million licensing fee and a 30% cut. What about you?"

"We discussed several options with Youke, and they were all cheaper than those offered by the Koreans."

"Let's go with 'Future Era' then, forget about 'DNF'. Koreans are really hard to deal with, it's been months and we still can't get them to agree. I heard they're negotiating with the French at the same time."

"Okay, I'll try to negotiate the price down further."

The negotiations resumed the following day.

This time, the wrangling only lasted an hour, and the final result was: a licensing fee of $280 million, with the developer receiving 25% of the revenue, and a contract term of four and a half years. The licensing fee will be paid in three installments, settling in full before the official launch in Europe. Revenue sharing will be paid semi-annually. There is no guaranteed minimum payment.

That afternoon, Chen Guiliang held a signing ceremony and press conference.

Invite the media attending the ChinaJoy electronics show to sign a distribution agreement for the game "Future Era" with the Germans.

Secretary Liu, Deputy Director Wu, and Director Kou were all present to offer their congratulations. The leaders were very pleased; another domestically produced game had been sold in Europe.

(End of this chapter)