Chinese game developer giant Changyou (NASDAQ: CYOU) has announced yesterday that it has agreed to acquire 17173.com from Sohu (NASDAQ: SOHU) for $162.5 million. The deal will be finalized sometime in December 2011.
Together with the deal, both giants — Changyou and Sohu — have also agreed that Sohu will not compete with Changyou in the gaming media portal business for a period of five years (Smart move).
In addition to the deal, Sohu will also provide Changyou with technical support, maintenance, and advertising space. The total service contract (note that this is separate from the acquisition deal) will cost Changyou around $35 million and includes a possible renewal of some of Sohu’s services, subject to Changyou’s decision in the future.
Changyou builds web-based and mobile games and its most well-known title is perhaps Tian Long Ba Bu (‘Novel of Eight Demigods’ in English) — a Chinese novel turned MMORPG game which is hugely popular in China. With the acquisition of 17173.com, it provides Changyou with an influential springboard to promote its games. Although I trust that 17173.com will continue to report, review, and promote non-Changyou games, too.
The CEO of Changyou, Tao Wang, briefly shared his thoughts on the acquisition in a statement we received:
Our leading position in web-based games and our mobile game initiatives give us advanced market knowledge that 17173 can leverage to plan and grow its news channels more effectively. In addition, our offline promotion workforce and our network of overseas game companies can also be used to promote 17173 and further increase its penetration in domestic market and accelerate its expansion into new markets.”
Interestingly, Changyou actually started out as a gaming business unit within The Sohu Group in 2003. It eventually became very successful, with several hits including Knight Online and Blade Online.
In December 2007, Changyou spun-off from Sohu. And in the same year, it also launched Novel of Eight Demigods, its biggest MMORPG hit and a game that remains popular to this day. That game also put Changyou on the global map as it was ranked as one of the “World’s Most Profitable Online Game Franchises” in 2009 by Forbes magazine. In April 2009, Changyou was publicly listed on NASDAQ. And today, it has acquired 17173.com for $162.5 million from the company from which it was spun-off.
Boy, what a story!