China’s iDreamSky pays $10M for majority stake in Silicon Valley game startup Rumble Entertainment

China’s iDreamSky Technology, a publicly traded mobile gaming firm, has acquired a 50.1 percent stake in Rumble Entertainment, the Silicon Valley maker of social and mobile games such as KingsRoad, for $10 million. The transaction is yet another that points to a future for mobile gaming in which big multinational companies dominate the market.

iDreamSky will also publish Rumble’s KingsRoad game in China under the agreement.

Above: Greg Richardson, CEO of Rumble Entertainment

Image Credit: Rumble Entertainment

The San Mateo, Calif.-based Rumble is a well-funded startup with a veteran game crew that started making social games for Facebook a few years ago and then expanded into mobile games. Greg Richardson, the former game investor at Elevation Partners and former chief of BioWare/Pandemic (now EA’s BioWare division), runs it.

iDreamSky, meanwhile, is a Shenzhen, China-based mobile game company that has published hits such as Fruit Ninja in the Chinese market. The acquisition gives the company a new foothold in Western mobile gaming markets. That’s important as more Chinese game companies realize that they must be players on the global market in order to have a well-balanced business and survive consolidation.

iDreamSky generated a profit of $23 million on revenue of $60 million in the quarter ended March 31, but some investors felt like its results fell short of expectations. The company’s stock price fell, and iDreamSky CEO Michael Xiangyu Chen is weighing an option to take the company private in a management buyout. Other publicly traded Chinese companies are considering the same thing. iDreamSky has more than 118 million monthly active users.

“It’s one of our biggest, most prominent moves in the West,” said Jeff Lyndon, the founder of iDreamSky, in an interview with GamesBeat. “I’m happy that we found a great team to invest in. Greg Richardson and his team have lots of experience. I enjoy the game a lot myself. It’s ahead of its time, in terms of both production values and the complexity of the game. Asia is moving much faster, so it’s the right time to start working with a developer on this kind of tier.”

Rumble has been focused on making high-quality mobile, social, and online games. But it hasn’t had an easy time challenging the top mobile games such as Game of War, Fire Age, Clash of Clans, and Candy Crush Saga. The company has 35 employees, and it was founded in 2011. All told, Rumble raised more than $35 million. The latest transaction clearly values Rumble at considerably less than its previous valuations.

Jeff Lyndon started iDreamSky in 2009, and it has published hit Western games such as Fruit Ninja, Temple Run, and a mobile version of EA blockbuster console role-playing series Dragon Age in China. That experience set iDreamSky apart from a lot of other Chinese game publishers and enabled the company to go public in August 2014. The company has 800 employees. All of those employees are in China.

One way for iDreamSky to get back on the growth path is to acquire other companies. That’s why this deal makes sense for both firms.

Under the deal, Lyndon said that iDreamSky is now the exclusive publisher for KingsRoad in the Asia-Pacific region.

“Ongoing, Rumble will need to continue to support KingsRoad and drive revenue, but there’s a new game already in closed beta and showing very promising results,” Lyndon said. “We see a lot of potential there. They didn’t have enough funding to finish the project, so that’s where we came in. This team is capable of driving more innovation and doing more games of high quality.”

Rumble focuses on role-playing mobile games that require lots of backend infrastructure and operate continuously, almost like massively multiplayer online games.

Lyndon and Richardson acknowledged that KingsRoad and other Rumble games didn’t get huge audiences that would have helped the company stay independent.

In an interview, Richardson said, “In learning free-to-play, we made a lot of mistakes and learned a lot. That will be reflected in our future games. In terms of financial success, our biggest impediment is not having enough marketing money. Our competitors can spend more than $10 million a month on marketing, but we could not spend anywhere near that.”

Lyndon believes that Richardson’s company will be well-positioned for the future.

“They are ahead of their time,” Lyndon said. “We’re seeing more and more developers like this, like with Vainglory. We’re going into a new cycle now. If you look at the history of gaming, whenever a new chapter starts, we start off where the tech goes kind of slowly, but on the new platforms people are making very innovative stuff. We’ve seen that in mobile, starting from games like Angry Birds or Fruit Ninja or Temple Run.

Above: Jeff Lyndon, the founder of iDreamSky, at ChinaJoy 2015.

Image Credit: Dean Takahashi

“The next phase we’re going into is like the PC era. When the first Pentium came out, we saw that leap in technology. That’s going to happen here as well. Now that a lot of game types have been explored, people are going to be looking for production quality. There are these specific phases in every chapter – first innovation, then a race for production values, then back to innovation again. Rumble was underappreciated because production quality wasn’t valued as much yet. In the future that’s going to change. You need to differentiate yourself from other games that way.”

Richardson added, “We decided iDS was the best partner for us based on our relationship with them and their track record in working with Western Publishers. They are moving into midcore and hardcore games on mobile, and that is where we are.”

Lyndon said that if all goes well, and the price is right, iDreamSky will add more studios to its portfolio of Western game developers. He said this deal worked with Rumble because they both built up trust for each other over a year and a half.

Rumble is working on an Android version of KingsRoad. Going forward, Rumble is expected to remain independent.

“We want them to come up with their own ideas, their own P&L. If it makes sense, they’ll go ahead and do it and publish it themselves in the West,” Lyndon said.