The privatization of Kongzhong completed the layout of film, television and literature live broadcasts and transformed into pan-entertainment

From the announcement of privatization in June 2015, to the conclusion of the final privatization agreement in December 2016, and then to the approval of the privatization agreement in March 2017, the privatization process that Kongzhong has been operating for nearly two years has basically come to an end.

Original title: Behind the privatization and delisting of Kongzhong is aiming at the broader pan-entertainment landscape.

March 24, a few days ago, Kongzhong announced that at the special shareholders meeting held on Monday, shareholders voted to approve the company's agreement reached in December last year. Privatization agreement. After the transaction is completed, Kongkong will become a privately held company and delist from Nasdaq. From the announcement of privatization in June 2015, to the conclusion of the final privatization agreement in December 2016, and then to the approval of the privatization agreement in March 2017, the privatization process that Kongzhong has been operating for nearly two years has basically come to an end.

Privatization and delisting is a game to maximize corporate interests

. At the beginning of this century, many China Internet companies made overseas listings an important goal for corporate development because Nasdaq did not have strict requirements for company listings. A number of China Internet companies have landed on Nasdaq, such as Sina, Sohu, Netease, and Kongkong. com.

However, since 2009, China Stock Exchange has been hit by short selling in the U.S. market and the financial crisis and the downturn in the U.S. stock market. Coupled with the serious underestimation of the value of China Stock Exchange in the U.S., some U.S. listed China Stock Exchange companies have successively chosen to privatize and delist. Especially in recent years, as China's stock market has warmed up, more and more Chinese stocks have chosen to be privatized, such as 360, Perfect Games, Giant Network, Shanda Games, etc., forming a "return wave." There were 10 China game concept stocks that were once listed on NASDAQ, but now only Netease, Ninetowns and Changyou remain.

Delisting does not mean that the development of the company will go backwards. From a deeper perspective, it is actually a game in which enterprises and even capital maximize their own interests. Take the game concept stock Perfect World as an example. On the eve of the privatization of Perfect World, its market value was only US$900 million, equivalent to about RMB 5 billion. After a series of capital operations, Perfect World returned to domestic A-shares. Through the integration of "Movio Interactive", the market value of Perfect World reached more than 40 billion yuan at its peak, nearly 10 times that of the time of privatization.

The same is true for Kongzhong. The privatization of Kongzhong is valued at only US$299 million, or approximately RMB 2 billion. However, Kongkong's revenue in 2016 is estimated to be about US$200 million. As an Internet company with tens of millions of high-quality users and stable cash flow, such a low valuation is unimaginable in the domestic A-share market.

From this point of view, Kongkong's choice to privatize is also a serious dissatisfaction with its own valuation. Wang Leilei, CEO of Kongzhong, joked,"If you don't leave me here, you will have a place to stay."

From an SP player to the largest virtual arms dealer in China

, as a company that has been listed on the NASDAQ for 13 years, Kongzhong's development can be said to have experienced ups and downs.

In 2002, Kongkong Network was established. According to reports, its main business at that time was mainly aimed at 2.5G and 3G development platforms such as MMS, WAP, and JAVA, providing entertainment products and complete wireless value-added services. Simply put, it provided MMS, ring tones, news, reading and other SP services.

In 2004, relying on the rapid development of its SP business, Kongkong was successfully listed on NASDAQ, setting the record for the shortest time it took for a China company to list on NASDAQ at that time, and became the Internet company at that time with Sina, Sohu, TOM, etc.

However, with the popularization and development of smart phones, SP business has declined. In 2008, former TOM CEO Wang Leilei took over Kongzhong, and Kongzhong has ushered in its second development period. In 2009, Kongkong acquired Shanghai Dacheng Network to transform its online game business. However, at this time, China net online game market has begun to enter the Red Sea, Shanda, Tencent, Netease, Perfect, Changyou, Giant and other head enterprises occupy the main market share, fierce fighting, as the second group of air net performance has been lukewarm.

It was not until a chance opportunity in 2011 that Kongzhong represented Belarusian game developer Wargaming's military online game "World of Tanks" without being optimistic, and achieved unprecedented success. According to statistics, more than 30 million of the most well-known "Type 59" tanks in the game have been sold, and the game has still steadily brought a large amount of profits to Kongzhong. To this end, Wang Leilei claimed to be "China's largest virtual arms dealer" in the interview.

The success of "World of Tanks" has opened a new door for Kongzhong and seen the potential of the field of military and military games. For this reason, Kongkong launched "Fighter World" in 2014, but due to reasons such as the gameplay was not suitable to the local environment, the expected results were not achieved. In 2015, Kongkong launched "World of Warships". Although it did not reach the level of "World of Tanks","World of Warships" still performed well in the market environment where terminal games were generally sluggish at that time, with more than 150,000 online users.

The success of "World of Tanks" and "World of Warships" has made Kongzhong the leader in the field of war and military games, and military and military have become Kongzhong's biggest feature and advantage. Holding several benchmark products for military and military games and tens of millions of highly loyal and high-paying users, these have become the trump cards in Kongkong's hands and provide full confidence for its privatization.

Not only is the game Kongkong network quietly outlining the pan-entertainment landscape,

but in the era of rapid development of the Internet, the market changes extremely rapidly, and "the city's top has changed its flag." The rise and decline of any field may only take a few years, such as SNS and group buying, which were once popular.

Although it has become the leader in the field of military and military games, Kongzhong's status is not unbreakable. Companies including Changyou, Tencent, Heroes Mutual Entertainment, Zhongqingbao, and Zulong Entertainment have seen the success of "World of Tanks" and have also launched military games such as tanks and warships, hoping to get a piece of it. Netease even "intercepted" from Konghong.com and seized the mobile game version of "World of Tanks". After adding "World of Tanks" and "World of Warships", there are no benchmark products to share the revenue pressure, and Kongkong is facing huge market pressure.

In this regard, Kongkong Network is also aware of the problem and has its own layout.

As early as 2015, Wang Leilei announced privatization. In an email to the inside, he mentioned: "Air has been developing: Kong 1.0 is an era of great development for SP;Kong 2.0, we introduced the game business and made it grow and grow. Become the company's main profit support;Kong 3.0, we are working hard..." The concept of Konghongwang 3.0 has officially entered people's attention.

Although it did not explain what the strategy of 3.0 was, it still saw some clues from the operation of Kongkong over the years. At the end of 2014, Air Galaxy Pictures was established to get involved in film and television; in 2015, it increased investment in its wave-chasing literature, mainly promoting mobile reading and key IP training; in 2016, King's Live Broadcast and Air Finance were quietly launched; in an interview in 2016, Wang Leilei also revealed plans to build a military theme park. It is not difficult to see that Kongzhong is quietly outlining its own "pan-entertainment" landscape.

Objectively speaking, the layout of the air network is not blind. Relying on years of operation in the military and military field and Wang Leilei's deep understanding of military and military, Kongkong has a large number of stable high-quality military fan users and capital accumulation. On this basis, it has expanded into mass entertainment fields such as film and television, live broadcasting, and reading. It is not impossible to form a commercial closed loop. Wang Leilei once said in an interview that doing pan-entertainment requires "brand capabilities, product capabilities, operational capabilities and user capabilities." These airnetworks also have their own confidence and foundation.

Privatization is also a move in the layout of Kongzhong. After privatization, with a stable cash flow and a large user base, we can operate capital more flexibly and lay out pan-entertainment according to our own plans. If you have the opportunity to list again in the domestic A-share market, you will definitely gain more recognition and popularity in the capital market than in U.S. stocks.

However, how to successfully carry out the 3.0 transformation while consolidating its advantages in the military and armed fields cannot be underestimated.

Since Shanda's earliest planning of the "Grand Box" and intended to create "Internet Disney, the concept of" pan-entertainment "has been mentioned by more and more companies. Tencent, Alibaba, Netease and other companies are also laying out their own pan-entertainment landscape, and the opponents Kongzhong faces are not "small players."

But there are also many people who are optimistic about the future of Kongzhong. The biggest characteristic of Wang Leilei, who came from a military family, is that he "does not follow common sense." Just as he defended "World of Tanks" against public opinion and achieved great success, Kongzhong's 3.0 transformation may once again make people's eyes shine.

Editor: Nancy