9you Gets Sued as Osaka Listing Approaches

Filed in archive IPOs on July 5, 2007

"9you may be the more famous company in China. In order to market its online music games to the masses, 9you has spent heavily to market itself as a Chinese entertainment brand and pop culture icon." That, according to Shang Koo, an editor at Shanghai-based Pacific Epoch. Next week 9you hopes to turn that name recognition and the popular appeal of its products into capital with an IPO in Japan on the Osaka Securities Exchange.

Now, on the eve of 9you's IPO, it appears that a Korean company, T3 Entertainment, will sue 9you. T3 Entertainment developed the software for 9you's most popular product, a dance game called Audition. The Korean firm claims that 9you is delinquent on fees it owes to them and that 9you "has not taken the proper steps to resolve this matter." The quote comes from a report in the Shanghai Daily and is from Kim Kiyoung, CEO of T3 Entertainment.

Audition, along with T3 Entertainment's first music game, O2Jam, are both operated by 9you in China and have around a million users there combined. The number of users 9you sees online has more than doubled in the last year.

The problems between T3 Entertainment and 9you are typical of online gaming in East Asia. 9you obtained licenses to operate T3 Entertainment's music games then developed similar, competing products that could be seem as simple upgrades of the original foreign software. 9you's new products are called Super Dancer Online and Burst a Fever. The Chinese company Shanda Entertainment did much the same thing in the MMORPG genre of games a few years ago with a different Korean firm.

9you's IPO lists in Osaka on July 12, so T3 Entertainment's announcement seems purposefully timed. 9you is planning to raise $160 million through the issue of 458,500 common shares. In addition to being very profitable as an online gaming company, 9you has begun capitalizing on brand recognition by partnering with clothing retailers.

Will T3 Entertainment's threatened suit impact the IPO's performance? We'll see...