Irvine’s K2 Network Inc. is going on a global shopping spree for online video games with millions of Intel Corp.’s money.
Intel’s venture capital arm led a $16 million investment in K2 Network, which runs a network where game players face off with each other on the Web.
The chipmaker looked at other game makers in Orange County before settling on K2, according to Alexander Marquez, director of Intel Capital in Santa Clara.
“Gaming just happens to be one of the fastest growing areas of interactive media and a good component is PC-driven,” he said. “We invest in various ecosystems that create demand for our products.”
Intel was attracted to K2 Network’s users (about 10 million people in more than 100 countries), Marquez said. It also likes K2’s management and ties to online game developers in Asia, he said.
“Most gamers today are serious users,” said K2 cofounder and Chief Executive Joshua Hong. “It drives up PC sales.”
K2 Network bills itself as a game publisher, rather than a developer.
Hong said he actively seeks out developers in the U.S., South Korea, China and Japan and strikes licensing deals to distribute their games online. K2 offers developers money up front, plus a share of revenue.
The company provides customer service and game masters, processes online payments and hosts Web sites.
“We do the whole nine yards to look after the welfare of the game,” Hong said. “These games have tens of thousands of players playing concurrently. You need to facilitate and manage the virtual community.”
Games are free to download and free to play, unlike those of online game kingpin Blizzard Entertainment of Irvine, which charges for games themselves and a monthly subscription fee to play them online.
K2 Network gets revenue by selling “premium memberships” ranging from $5 to $30 for each game.
A membership gives players what Hong calls “enhancements” to the game, such as currency, weapons and other tools that have value within the role-playing world.
The games’ “inside economy is everything,” Hong said. “Gamers take it very seriously.”
Players also can buy bundled versions of a game, which include enhancements, at stores such as Best Buy, Game Stop, Target and Wal-Mart. Prices are $20 to $30.
Players buy the enhancements to get an edge over others in role-playing games where thousands play at a time online.
“If you pay and become a premium member, you get more weapons at your disposal,” Hong said. “As a free member, you can spend a lot of hours to get additional weapons and currency.”
Hong, 36, started the company with partner Chris Hwang out of his apartment in Newport Bluffs just six years ago.
He took a trip to his native South Korea, which has one of the highest rates of broadband Internet access and has been at the forefront of what’s called “massively multiplayer online games.”
There he met with gamers and developers and got a sense of how big the market could be.
“The way people socialize today has fundamentally changed,” Hong said. “They socialize in a virtual community.”
Hwang funded the company out of his own pocket initially.
A few years later, the company had a hit with the release of “Knight Online.”
“That became an instant success, where we were attracting tens of thousands of new users each day without any marketing. It was all viral,” Hong said.
K2 Network saw its first round of funding, totaling $5 million, about a year ago.
Investors included San Francisco-based BV Capital and South Korea’s MVP Capital.
The company since has grown to about 120 workers in Irvine, with another 80 in Bangalore, India.
Hong said the company is putting its fund raising on hold for a while and plans to use the latest money to buy more games.
“I think this is a pretty big chunk of cash and the company is already generating a significant amount of revenue,” he said.
Hong declined to give specifics.
K2’s newest game, “Sword of the New World: Granado Espada,” is being tested online. Other titles include “War Rock” and the not-yet released “Red Stone.”
“Sword of the New World” is set to start selling in stores July 2.
Hong said that more than 100,000 players already have downloaded the American version of the game.
