East meets West in mobile games as Kabam raises $120M from China's Alibaba Group

Disclosure: The organizers of ChinaJoy paid my way to Shanghai. Our coverage remains objective.

SHANGHAI — Mobile game publisher Kabam has raised $120 million from China’s Alibaba Group as it forms a strategic alliance to reach more players across the globe.

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The companies announced the deal at the ChinaJoy Expo in Shanghai, a gargantuan event where 250,000 people are gathering to celebrate gaming. At the event, mobile games are center stage for the first time, and Kabam chief executive Kevin Chou is one of the keynote speakers.

Alibaba Group, the world’s largest online and mobile commerce company, plans to go public in what could be one of the biggest initial public offerings in history in the U.S. And the fact that it is investing in a San Francisco-based mobile game company shows how important gaming has become on the global stage.

Kabam has more than 800 employees making a portfolio of games in competition with rivals like Supercell, King, and GungHo Entertainment. But while it has proven adept at generating revenues and expanding quickly, it also spends a lot of money. That’s why the company is still raising money at a late stage in its history.

Alibaba will publish popular Kabam mobile games in China across Alibaba’s mobile applications, including Mobile Taobao and Laiwang. Kabam’s games include Kingdoms of Camelot: Battle for the North, The Hobbit: Kingdoms of Middle-earth, Fast & Furious 6: The Game, and Dragons of Atlantis: Heirs of the Dragon.

More terms of the deal were not disclosed.

“Truly successful games companies have to be globally successful,” said Chou, in a statement. “This strategic alliance with Alibaba provides Kabam the resources, infrastructure, and distribution to help bring our current and future durable franchise games to China and elsewhere in Asia and make an immediate impact.”

“Alibaba is committed to collaborating with great games companies like Kabam to deliver captivating digital entertainment offerings to our users,” said Patrick Liu, president of Alibaba Group’s digital entertainment business unit. “The Kabam team has a track record of innovation and a strong entrepreneurial spirit, and this is exactly the type of company we want to support.”

China and other Asian markets have already played a key role in the growth and success of Kabam. The company opened an office in Beijing four years ago and develops many of its marquee mobile titles there including The Hobbit: Kingdoms of Middle-earth and Kingdoms of Camelot: Battle for the North, each of which has generated more than $100 million in revenue.

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Kabam also created a $50 million fund to invest in hit games from Asian developers and take them to a global audience. Kabam generated $360 million in revenue in 2013, up 100 percent over 2012. Kabam has alliances with Warner Bros., an investor in Kabam, to make movie-related games. It also recently announced a deal to make games based on Lionsgate’s The Hunger Games movie properties and another deal with Marvel to make a game based on Contest of Champions.

Kabam’s investors also include Google Ventures, MGM, Intel, Canaan Partners, Redpoint Ventures, Pinnacle Ventures, and more. Citigroup Global Markets Inc. acted as lead financial advisor to Kabam. J.P. Morgan was also a financial advisor to Kabam. O’Melveny & Myers served as legal advisor.