Bilibili's Investment in TapTap Is A Win-Win, And Here Is Why- PingWest

Bilibili's Investment in TapTap Is A Win-Win, And Here Is Why- PingWest

Bilibili's Investment in TapTap Is A Win-Win, And Here Is Why

Aron Chen

posted on 2 hours agoEditor : Wang Boyuan

TapTap challenges the common unfair taxation of the Chinese game distributors, and will help Bilibili reach more gamer audience.

Chinese video sharing and streaming platform Bilibili has invested HKD9.6 billion in domestic game distribution platform TapTap.

Under the agreement, Hong Kong and Nasdaq listed Bilibili has purchased a 4.72% stake of Taptap's owner X.D. Network at HKD42.38 per share.

The investment aims to enrich the video platform's content that caters to the diverse tastes of animation fans, gamers, and merchants.

Initially positioned as a playground for China's ACG (anime, comics, and games) community, Bilibili has been expanding its offerings to a wide range of categories, like fashion, lifestyle, beauty, music, and technology. Their ambition is to become a comprehensive and vibrant community for all kinds of users and video creators.

Despite its more diversified business, Bilibili's games are still its largest revenue-generating sector, which accounted for 40% of the total revenue in 2020. However, the gaming sector showed flat growth over the past year, declining from 71% and 53% in 2018 and 2019.

According to Bilibili's financial report, its game sector generated total revenue of CNY1.13 billion in the fourth quarter of 2020, down 11.7% month-over-month.

As one of the cash cows of Bilibili, slowing revenue growth of the gaming sector is not a good sign, especially for a loss-making company like Bilibili, which has been in the red for 13 consecutive quarters.

The tie between Bilibili and X.D. Network presents a win-win situation; Bilibili can promote its games through TapTap's distribution channels and attract X.D. Network's game fans to its video streaming rooms, while Bilibili can help X.D. network break out of its niche by reaching a broader audience on its platform.

Founded in 2002, X.D. Network is a Hong Kong-listed online game developer/distributor, running 38 titles under its online community and distribution platform TapTap. Some of X.D. Network's popular titles include Ragnarok Online Mobile: Eternal Love, Girls' Frontline, Sausage Man, and Muse Dash.

Unlike traditional distributors such as application stores, Taptap doesn't charge a commission when the payment is made under the in-app purchase.

It is not rare to see disputes between game developers and platform owners over revenue sharing. In January, Huawei has temporarily removed all Tencent games from its own app store after the two companies disagreed on revenue sharing.

Huawei insisted on the original agreement for a revenue cut - a 50-50 arrangement for Tencent game sale on the Huawei app store, which Tencent can not agree on.

Following the removal, Huawei users could not search Tencent games from the Huawei AppGallery, including some of its most popular titles such as Honour of King, Peacekeeper Elite, and Call of Duty Online.

In September 2020, a similar conflict erupted between the game-maker MiHoyo, developer of the popular mobile game "Genshin Impact," and Huawei.

When most Chinese game distribution platforms stick to the typical 50-50 revenue sharing standard, Taptap's zero-commission fee policy has helped X.D. Network to attract a number of gaming companies to be its backers, including Lilith Games and MiHoyo, as mentioned earlier.

"Buying a stake in X.D. Network is a good and reasonable choice for Bilibili. As many game distribution channels dominated by giants like Tencent and app stores, there is not many choices for Bilibili that want to integrate whole supple chain of games from development, distribution to stream and in-game e-commerce," Wang Xiao, a senior developer at Beijing-based Changyou Games told PingWest.

Game companies have often struggled to agree on the revenue cut due to the unbalanced share rate. In the past, game developers have less bargaining power in-game monetization because they have to cooperate with app stores to ensure download volume to maintain their revenue.

However, things are different now as social media plays a significant role in game distribution. More game studios started rebelling against app stores.

Game studio reduced reliance on app stores for game distribution. Some popular titles, such as Moontagne's Arknights, MiHoyo's Genshin Impact, have never shown up in the domestic phone makers' built-in app stores. Instead, they started a market campaign on social media. They cooperated with platforms like Bytedance's Douyin and Bilibili, which have a large fan base.

For video sharing platforms like Bilibili and Douyin, the must-to-do task has consistently been growing its fan base by enriching its unique content and attracting more content creators.

In March, Tiktok owner Bytedance has acquired Moonton Technology, the developer of famous mobile games-Mobile Legends: Bang Bang.

The acquisition enables Bytedance to strengthen its gaming offerings and helps it become a more serious competitor to Tencent and NetEase, China's two largest gaming companies by revenue.

Bilibili is also reportedly in talks to buy a majority stake in Yoozoo Games for an undisclosed amount, as many Chinese media reported, citing a source close to the matter.