More Asian Moves From Cryptologic

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568 Network deal strengthens Asian strategy

Turnkey provider and gambling software developer CryptoLogic Limited has inked an agreement to acquire a financial interest in 568 Network Inc., a developer and distributor of online casual games to the Chinese market.

The agreement - valued at $1.2 million - strengthens CryptoLogic's position in Asia, widely seen as the next growth market for Internet gaming.

Under the terms of the agreement, CryptoLogic has the option of taking a controlling interest in 568 Inc. in the future.

"Just as CryptoLogic is an e-gaming industry leader in Europe today, we aim to be a leader in Asia tomorrow," said Javaid Aziz, CryptoLogic's president and CEO. "The stakes are rising in Asia, which has a population of almost four billion, a deep-rooted gaming culture and a fast-growing rate of Internet adoption. CryptoLogic is already a player in Asia - and this investment strengthens our hand considerably for the years to come."

The agreement enables 568 Inc. and CryptoLogic to establish a new China-based venture that will develop and distribute casual, skill-based games for the local and overseas Chinese-language markets. Games will include single- and multi-player mahjong, poker, online pool, puzzle challenges and approved card games including Chinese poker variants.

568 Inc. has a Chinese subsidiary that is already creating games for that market. Its titles include card games such as "Fight Landlord" and "Za Jin Hua," and skill-based casual games such as "Lian Lian Kan" and "Dragon Ball."

"With CryptoLogic as a partner, we gain two things that are critical to success in China: the scalability to support thousands of concurrent players, and the expertise to deliver a superior entertainment experience," said George Chen, CEO of 568 Inc. "We are seeing early signs that we are on the right track: since June, we have generated more than 350 000 new registered players and are averaging more than 4 000 concurrent online players. Together, CryptoLogic and 568 Inc. have vast potential for profitable growth."

In addition to its experience in casual games, 568 Inc. brings proven experience and assets in massively-multiplayer-online-role-paying games (MMORPG), another rapidly growing segment of online gaming. Through its wholly-owned subsidiary, G4Box, based in Canada, 568 Inc. operates high quality MMORPG games developed for the North American online multiplayer games market.

"Casual games represent one of the fastest-growing segments of approved online gaming in China - and in markets around the world," said Shailesh Naik, Managing Director of CryptoLogic Asia-Pacific. "Experts have positioned online casual games as the major source of revenue for the next three to five years. With 568 Inc's proven experience in this market, and CryptoLogic's award-winning game offering, we are in a strong position to capture our share of this exciting market."

Cryptologic spokesmen said that Asia is quickly becoming the next major growth region for Internet gaming. Industry forecasts suggest the continent will ultimately become the largest online gaming market in the world. China alone has more than 135 million Internet users, ranking second only to the United States, and can also claim the world's largest mobile phone market, with more than 400 million subscribers. Many are expected to switch to high-speed 3G networks over the next few years, creating an explosive growth opportunity for game and content developers.

CryptoLogic's Asia strategy is consistent with the company's global focus on integrity and innovation. For example:

- CryptoLogic only offers game experiences and payment methods that are approved by local regulators. The company aims to develop long-term partnerships with governments and regulatory authorities that enable citizens to enjoy online digital entertainment in a safe, structured and regulated environment.

- CryptoLogic's new Asian games will reflect local cultures and languages, while leveraging the company's proven ability to produce highly popular, award-winning titles. While Asia's adoption rate for broadband and mobile technologies is among the highest in the world, local gamers have unique preferences for content and presentation. By working with local partners - via licensing arrangements or acquisitions - CryptoLogic will better understand players and produce games they want and are willing to pay to play, rather than merely exporting titles designed for other regions.

- CryptoLogic's exceptional capabilities in developing games of chance will benefit the company as it moves into single-and multi-layer casual games, along with MMORPG. These segments of the e-gaming market have massive revenue potential in all of Asia's largest economies, including China, Japan, Korea, Singapore and India. Through partnerships, acquisitions and strategic alliances, CryptoLogic will offer a complete spectrum of profitable game types (chance, skill, casual and role-playing games), across key technology platforms including PC, online, mobile and console.