Are GigaMedia and The9 Limited Co-operating to capture the Southeast Asia online gaming market? Yes!!

Will The9 (NCTY) take more steps to acquire a direct interest in GIGM to consolidate its in China competition and to expand its consolidation beyond main land China?

All links shown as (RL: xxx) denotes a reference link to supporting material.

 

Consider:

Infocomm Asia Holdings (IAH) views the Southeast Asia market as similar to China three years before consolidation by Shanda (SNDA) and The9 (NCTY), and could reach half the size of the China market. IAH intends to unlock the potential of this fast growing market. (RL: IAH Investor page)

IAH plans to use the reliable and robust Pass9 Gaming Platform for Southeast Asia. Pass9 is an integrated membership, payment and service management platform, offering online game operators a complete account and payment management system with integrated backend support. (RL: IAH About+Strengths page)

Pass9 was orginally developed by The9 (NCTY) for the China market: "...[The9 is using] internally developed Pass9 and other software systems that support nearly all aspects of our billing and payment transactions.". (RL: The9 2006 20-F, page 15)
Pass9 usage by The9 (NCTY) is described as: "Our customers typically access our online games through PCs at home or in Internet cafés. They obtain our game playing time primarily through purchasing our prepaid cards at various retail outlets or purchasing online points at one of the more than 210,000 Internet cafés throughout China which have subscribed to our Pass9 system. Pass9 is our proprietary, fully integrated online membership management and payment system, which offers one-stop account management and payment services to our customers and facilitates our payment arrangements with distributors and Internet cafés." (RL: The9 2006 20-F, page 35)

The9 (NCTY) and GIGM are major investors in IAH. (RL: IAH About + Investors page)
The9 (NCTY) share of IAH’s equity interest is 13% after a third party’s investment in IAH in December 2006. ( RL: The9 2006 20-F, page F-29)
GIGM holds the equivalent of 28% of IAH as of June 15, 2007. (RL: GIGM 2006 20-F, page 24 of 505)

The9 (NCTY) has licensed Hellgate:London and Granado Espada for China. (RL: The9 2006 20-F, page 35 and 36)
IAH has exclusive licenses Hellgate:London and Granado Espada for 8 Southeast Asia countries. (RL: The9 2006 20-F, page F-29)
GIGM has exclusive licenses for Hellgate:London from IAH: (RL: GIGM 2006 20-F, page 25 of 505) GIGM has the rights to operate Hellgate:London in Taiwan, Hong Kong and Macau: (RL: GIGM 2006 20-F, page 29 of 505)
GIGM and IAH have setup a joint venture: "...[to] operate Hellgate: London in partnership with Infocomm Asia through a strategic joint venture, Dragongate Enterprises Limited (“Dragongate Enterprises”), in which we hold a 70 percent interest and Cyber Gateway Pte. Ltd. (a wholly-owned subsidiary of Infocomm Asia) holds a 30 percent interest." (RL: GIGM 2006 20-F, page 26 of 505)

GIGM has a majority interest in T2CN which operates in the China market: "As of June 1, 2007, we own 18,118,926 common shares and 15,000,000 convertible voting preferred shares of T2CN, and also control voting rights with respect to 850,000 common shares of T2CN, which in aggregate represents a controlling interest of 51.12 percent of the total outstanding voting rights of T2CN." (RL: GIGM 2006 20-F, page 152 of 505)

T2CN holds the rights to FreeStyle for China. FreeStyle is a massively multiplayer online basketball game from JCEntertainment, initally released in 2005. As of August 2007, the T2CN FreeStyle site in China, www.fsjoy.com, is the most popular T2CN site based on Alexa rankings. (RL: aboutGIGMSites )

GIGM's FunTown is operational in China as June 2007. (RL: GIGM 2006 20-F, page 25 of 505) Click here for more on GIGM's sites.

Conclusion:

The9 (NCTY) and GIGM have formed a partnership through their investments in IAH with the objective of consolidating Southeast Asia online gaming.

The9 (NCTY) and GIGM compete, through GIGM's interest in T2CN, in the China market. T2CN did beat outThe9 (NCTY) for FreeStyle in China. However, The9 (NCTY) and GIGM competition in China is outside of the scope of their co-operation through IAH.

Speculation:

Will The9 (NCTY) take more steps to acquire a direct interest in GIGM to consolidate its in China competition and to expand its consolidation into Southeast Asia? FunTown.com.cn operation in China could no doubt be improved with access to The9 (NCTY) Pass9 payment infratstructure. As of July 2007, FunTown.com.cn have very low China traffic numbers. (RL: Alexa traffic data)

Although very speculative, given relative market caps and existing levels of co-operation and blue sky growth opportunities in Southeast Asia, it appears that The9 (NCTY) is well positioned to take over GIGM. Key news items to watch for further hints on this The9 (NCTY) take over of GIGM would be
The9 (NCTY) consolidation moves in the Southeast Asia market. NCTY news here.
Hellgate:London rollout in China and Southeast Asia. Hellgate:London news here.
Asia Online Gaming M&A