Huayi Brothers Makes $288 Million Investment In Chinese Mobile Esports Company Hero Entertainment

Posted By Joss Wood on September 16, 2016 - Last Updated on January 22, 2018

[toc]Chinese movie studio, Huayi Brothers Media, has completed its investment of $288 million in Hero Entertainment.

Hero’s primary business is the development and management of esports games and promotion of mobile esports competitions. It developed the most popular first person shooter (FPS) game in China.

The company was established in June 2015, with founding investors being three of China’s largest venture capital companies, Sequoia Capital and ZhenFund, and Huasheng Capital.

Huayi will develop films and broadcast entertainment based on Hero games

Huayi is buying a 20 percent stake in Hero, which will make it the company’s second largest shareholder.

In addition to the equity, Huayi gains “right of first refusal in terms of adapting any of the eSports games developed or managed by Hero Entertainment into films, TV series, web series or other media form, at the fair price and on equal terms.”

In addition, Huayi Brothers’ subsidiary Huayi Brothers (Tianjin) Interactive Entertainment will treat Hero Entertainment as “the partner of choice for the joint development of any eSports games within its interactive environment.”

Sequoia Capital Global Managing Partner Neil Shen commented:

“In the long term, we believe that under the leadership of Ying Shuling, the new team can make great strides in terms of the development of the mobile game sector and inject the sector with a burst of new energy.”

Hero Entertainment has committed to big profit goals

The deal includes a commitment to “an audited after-tax net profit for 2016 of not less than 500 million yuan and estimated audited after-tax net profit for 2017 and 2018, in each case, 20 per cent higher than that of the previous year.”

Over the next three years, that implies profits of not less than RMB1.82 billion ($270 million).

Hero Entertainment chief executive Ying Shuling said:

“Hero Entertainment has been very cautious in its choice of investors and partners. They must have the same goal and values, and be willing to work as a team to jointly build Hero Entertainment into a great Internet company.

Each investor and partner is expected and had committed to a long-term cooperation and to jointly contributing to the firm’s growth.”

Hero has created esports leagues and the Chinese esports association

In July this year, Hero entered a joint venture with Virtuix, a company that enhances games with its virtual reality Omni platform.

Hero is entering the joint venture through its Hero Sports subsidiary, which owns the Hero Pro League, China’s biggest professional mobile eSports league.

Hero Sports is also the founder of the China Mobile eSports Alliance, branded as Heroes Alliance. It is a national mobile esports games association, the largest of its kind in the country.

On September 13, Hero handed over responsibility for Heroes Alliance to the Versus Programming Network (VSPN).

VSPN is a strategic cooperation between the network, gaming platform PLU and Hero Sports. The press release heralded VSPN as “the world’s first publisher and operator of competitive games on mobile devices.”

VSPN will also have “exclusive management and investment rights in Tencent Gaming Awards (TGA) and the Hero Pro League (HPL), and acquire the right to host “King of Glory” Pro League events.

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Alibaba and Tencent are shareholders in Huayi Brothers

The appearance of Tencent is no surprise.

It is a major shareholder in much of the esports industry and in November 2014 invested RMB1.28 billion ($190 million) in Huayi Brothers in exchange for an 8 percent stake.

Amongst other minor holdings, Tencent owns

  • 100% of Riot Games—owner of League of Legends
  • 84% of Supercell—owner of Clash of ClansClash Royale
  • 5% of Blizzard Activision—owner of Call of DutyCall of Duty OnlineStarcraft IIHeroes of the StormHearthstoneOverwatchCandy Crush
  • 40% of Epic Games—owner of ParagonUnreal TournamentFortnite
  • 5% of GLU Mobile—owner of WeFireQuizUp
  • 28% of CJ Games/Netmarble—owner of Marvel Future Fight

At the same time as Tencent invested in Huayi Brothers, Alibaba also bought an 8 percent stake.

In March 2016, the Alibaba Sports Group (Alisports) announced the World Electronic Sports Games (WESG). It is investing over a billion yuan in the deal in partnership with the International e-Sports Federation (IeSF).

With Alibaba and Tencent as investors, it is no surprise that Huayi Brothers has made its own move into the esports and mobile gaming industry.

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Joss Wood

Joss Wood holds an English degree from the University of Birmingham and also earned a master’s degree in organizational development from the University of Manchester. Joss has a special focus on the international online gambling market, though he also writes extensively on US regulated markets, sports betting, and esports betting.

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