The Southwood Group have been closely observing Microsoft Inc as preparation is made to partner with BesTV New Media Co, in a $79 million joint venture to develop and support gaming in the China's Shanghai free trade zone.
The announcement of the cooperative venture comes as China's government contemplates the lifting of a ban on gaming consoles implemented in 2000 to combat the perceived negative influence of this media on young people. The reality of the outright ban saw the computer savvy Chinese youth market look instead to online gaming, turning the sector into the largest in the world, ultimately leading to the success of internet giants like Tencent Holdings LTD.
With the possible withdrawal of the 13-year-old ban, Microsoft and its partner are looking to capitalize by developing, sourcing and supporting gaming products inside the Shanghai free trade zone, so long as the products abide with strict legislation on approved content they will become legally available. By being located domestically, the combined operation would be ideally placed upon the lifting of the restriction especially in light of Microsoft manufacturing the X box gaming console line.
"More often than not when we hear of partnerships with Microsoft they are generally very large and the reason we are hearing of them is that they are not performing as expected. Small arrangements like the one with BesTV on the other hand tend to turn out very well for both partners and there is no reason to think that this will not be the case here. They are going to be very well placed in regards to the console ban being lifted or not," said Senior Vice President of Mergers and Acquisitions James Morgan at The Southwood Group.
If the lifting of China's ban on console based gaming is lifted it could be of massive importance to the world's manufacturers of consoles and software developers as the North American market for their products sees slower growth. A Chinese market for such products could conceivably be valued as high as $10 billion and would be expected to grow dramatically in pace with other sectors of media technology in China. Shares in BesTV New Media Co, a subsidiary of Shanghai Media Group surged over 10% after news of the announcement broke further propelling the company's spectacular year to date ROI of 215.88%.
"The future possibilities for growth and success are good for this joint venture, you have got a dynamic, well integrated young company being partnered with a truly global tech giant and both trying to break into a under exploited and large market. There are very few better positions to be in when negotiating the start of a new business and the markets are definitely seeing the potential of such a combination. While we would still play cautiously in relationship to the flow on effects from any lifting of China's console ban, we are expecting very promising results regardless for this venture," added Senior Vice President of Mergers and Acquisitions James Morgan at The Southwood Group.
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