iCandy Interactive forms game studio joint venture with Lemon Sky Studios

Mobile game and e-sports group iCandy Interactive (ASX: ICI) is forming a new game studio in Malaysia under a joint venture deal with premier art and animation studio Lemon Sky Studios.

A signed binding term sheet will see the pair jointly develop a new line of 3D mobile games of “AAA quality” and with cross-platform potential.

In the video game industry, AAA is an informal classification used for games with the highest developing and marketing budgets and which are generally expected to be high-quality bestsellers.

iCandy chairman Kin Wai Lau told Small Caps that teaming up with Lemon Sky is “a big deal”, describing the studio’s work as “legendary”.

“They have worked on almost every single AAA big hit in the last 20 years … In an analogy to the Hollywood movie industry, I would equate this partnership to working with a Hollywood production house that has had a hand in 80% of the top grossing movies in the last two decades,” he said.

Mr Lau added that each company brings different strengths, which combined would be “like having a superpower to make potentially visually stunning games that play well”.

iCandy to step up its game with better visuals

According to iCandy, its new partnership with Lemon Sky will help it “step up its game” by adding to its portfolio the capability to develop 3D mobile games with “better visuals and animation, which can be a catalyst to propel the company to its next level of growth and success”.

“The strategic collaboration between iCandy and Lemon Sky will allow the two companies to leverage on each other’s strengths to expand their product offerings, with iCandy offering its large gamers community as well as prowess in mobile gaming and esports, and Lemon Sky offering its world-class animation and digital art skills, as well as business connection with global gaming industry behemoths,” the gaming developer said.

The joint venture studio will develop its own line of products and Mr Lau said there will be a working committee to direct on game genre and production plans.

“It is still early to tell, but we will likely be making a 3D mobile game as our first title. We expect to have the first game out within next 12 months or sooner.”

Mr Lau said the company is aiming for “stunning growth in the next three to five years”, given the video game industry is worth about US$160 billion (A$219 billion) this year and “growing tremendously”.

This is especially the case since the COVID-19 pandemic accelerated consumer online entertainment needs and behaviour, he added.

A world leader in video game animation

Kuala Lumpur-based Lemon Sky is internationally recognised as a leading computer-generated imagery (CGI) studio focused on developing animation and digital art for the video game industry.

The studio has worked with industry giants such as Disney, Nickelodeon, Blizzard Entertainment, Electronic Arts, Square Enix and Naughty Dog, 2K Games, Capcom and Bandai Namco.

Some of its “AAA” class game titles include Marvel’s Avengers, Command & Conquered Remastered, Warcraft 3: Reforged, Starcraft: Remastered, Call of Duty: Infinite Warfare, and Final Fantasy VI Remake.

Terms of the deal

A definitive joint venture agreement is expected to be entered into within 30 days of signing the binding term sheet.

Under the deal, a 50:50 joint venture company will be formed in Malaysia, with each partner committing a total of RM1 million (A$335,000) of initial working capital and agreeing to contribute equally going forward.

Alternatively, third party investors could be invited to invest capital into the joint venture company at a later stage.

iCandy said it will fund its portion of financing for the joint venture’s incorporation from its operating cashflow.

The initial operation and game studio will be established in the Malaysian capital of Kuala Lumpur.

Each company has the right to nominate two representatives to the joint venture company’s board of directors, who will review and approve annual budgets and appoint the management committee. The joint venture studio will hire its own dedicated team with both iCandy and Lemon Sky assisting in recruitment.

iCandy already has its operational headquarters in Kuala Lumpur, as well as corporate headquarters in Melbourne, Victoria and an office in Singapore.

Other recent developments

Following 1 million pre-orders, iCandy launched its latest game Masketeers: Idle Has Fallen a month ago and has already recorded $668,000 in revenues. This achievement far exceeds the company’s previous most successful game, CrabWar, which generated about $65,000 in its first 30 days of operation (and more than $3.5 million to date).

The 100% owned game is expected to contribute significantly to the company’s current and subsequent financial year revenues with iCandy planning to translate and localise the game into other languages.

China has been identified as a key market for a potential publishing partnership as it is one of the most lucrative video game markets in the world, iCandy said.

Gaming connections

iCandy is also a founder of e-sports startup E-sports Players League (ESPL) and is backed by other gaming companies including Animoca Brands and China’s leading games industry business network, Global Mobile Game Confederation (GMGC).

In addition to being iCandy’s chairman, Mr Lau is the chief executive officer of technology venture investment firm Fatfish Group (ASX: FFG), which holds a 41% controlling stake in the company via its subsidiaries.

New game launch

Earlier this week, iCandy released Hellopet House, developed in collaboration with South Korean game studio Nanali Inc.

It has been launched into 65 countries – 20 more than initially planned – as a free-to-play game with in-app purchases.

It is available through the Appstore and Google Play in English, simplified and traditional Chinese, and Korean.

The game has proven popular since it became available to pre-order, having racked up over 600,000 registrations prior to release.

iCandy has exclusive rights to publish Hellopet House worldwide for three years.

The company recently raised $2.25m led by Melbourne-based broker Peak Asset Management.