China’s Meitu to buy 31% stake in gaming firm for $340m

Customers at an internet cafe play online games in Beijing. Photographer:Nelson Ching/ Bloomberg

China’s largest selfie app maker Meitu has set its sights on a new market – game publishing.

According to a filing, the Hong Kong-listed company plans to acquire a 31 per cent stake in PC and console gaming company Dreamscape Horizon for $340 million.

Dreamscape Horizon is a subsidiary of Hong Kong-listed games group Leyou, and owns 97 per cent of Canada-based studio Digital Extremes.

According to a TechCrunch report, Meitu’s move to acquire will hasten its overseas expansion, while helping the Xiamen-based firm capture more male users. The report adds that just 30 out of 110 million of Meitu’s monthly active users overseas are male.

Meitu’s acquisition plan also appears to be a tactical move to take advantage of the hostile gaming market in China. In recent months, the Chinese government has tightened regulations on game approvals, causing players like Tencent and NetEase to suffer lower game sales.

The move will also diversify Meitu’s business beyond its hardware unit, generates most of its revenue. While Meitu is popularly known for its photo-edited and beautifying apps, most of its revenue comes from its hardware unit. The company generates 72 per cent of its revenues from smartphone sales, a category that’s in danger of shrinking as global shipments slow. Competitors like Xiaomi and Huawei have also eaten into Meitu’s market share by producing similar phones equipped with beautifying filters.

In a statement to TechCrunch, Meitu explained that the collaboration with Leyou will broaden its business scope and diversify its geographic streams of income. It added that Mainland China currently accounts for the majority of its earnings.

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