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Tencent leads $100M Series B funding round into China-based esport provider VSPN

Further confirmation that the esports market is booming amid the pandemic comes today with the news that esports ‘total solutions provider’ VSPN (Versus Programming Network) has raised what it describes as ‘close to’ $100 million in a Series B funding round, led by Tencent Holdings . Other investors that participated in the round include Tiantu Capital, SIG (Susquehanna International Group), and Kuaishou. The funding round will go towards improving esports products and its ecosystem in China and across Asia.

Founded in 2016 and headquartered in Shanghai, VSPN was one of the early pioneers in esports tournament organization and content creation out of Asia. It has since expanded into other businesses including offline venue operation.

In a statement, Dino Ying, CEO of VSPN (see also our exclusive interview) said: “We are delighted to announce this latest round of funding. Thanks to policies supporting Shanghai as the global center for esports, and with Beijing, Chengdu, and Xi’an expressing confidence in the development of esports, VSPN has grown rapidly in recent years. After this funding round, we look forward to building an esports research institute, an esports culture park, and further expanding globally. VSPN has a long-term vision and is dedicated to the sustainable development of the global esports ecosystem.”

Dino Ying, VSPN CEO

Mars Hou, general manager of Tencent Esports, commented: “VSPN’s long-term company vision and leading position in esports production are vital for Tencent to optimize the layout of the esports industry’s development.”

We had a hint that Tencent might invest in VSPN when, in March this year, Mark Ren, COO of Tencent Holdings, made a public statement that Tencent would provide more high-quality esports competitions in conjunction with tournament organizers like VSPN.

As we observed in August, Tencent, already the world’s biggest games publisher, that it would consolidate Douyu and Huya, the previously competing live-streaming sites focused on video games.

In other words, Tencent’s investment into VSPN shows it is once again doubling-down on the esports market.

This Series B funding round comes four years after VSPN’s 2016 Series A funding round, which was led by Focus Media Network, joined by China Jianteng Sports Industry Fund, Guangdian Capital, and Averest Capital.

Now, VSPN has become the principal tournament organizer and broadcaster for PUBG MOBILE international competitions, and China’s top competitions for Honor of Kings, PUBG, Peacekeeper Elite, CrossFire, FIFA, QQ Speed, and Clash Royale. This will tally-up 12,000 hours of original content. The company has partnered with over 70% of China’s esports tournaments.

In March, another huge esports player, ESL, joined forces with Tencent to become a part of the PUBG Mobile esports circuit for 2020.

In addition to its core esports tournament and content production business, VSPN has branded esports venues in Chengdu, Xi’an, and Shanghai. In May, VSPN launched its first overseas venue, V. SPACE in Seoul, South Korea.

And even offline events are coming back. VSPN hosted the first large-scale esport event with offline audiences in August this year. And the LOL S10 event will open 6,000 tickets. However, all tournaments will operate under strict COVID-19 prevention measures and approval processes by the Chinese government, and not all esports events are allowing offline audiences. In the main, only high-level ones are approved.

VSPN said it will continue to focus on building an esports short-form video ecosystem, improving the quality of esports content creation, and reaching more users via different channels. VSPN currently houses more than 1,000 employees in five business divisions.

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Intel agrees to sell its NAND business to SK Hynix for $9 billion

SK Hynix, one of the world’s largest chip makers, announced today it will pay $9 billion for Intel’s flash memory business. Intel said it will use proceeds from the deal to focus on artificial intelligence, 5G and edge computing.

“For Intel, this transaction will allow us to to further prioritize our investments in differentiated technology where we can play a bigger role in the success of our customers and deliver attractive returns to our stockholders,” said Intel chief executive officer Bob Swan in the announcement.

The Wall Street Journal first reported earlier this week that the two companies were nearing an agreement, which will turn SK Hynix into one of the world’s largest NAND memory makers, second only to Samsung Electronics.

The deal with SK Hynix is the latest one Intel has made so it can double down on developing technology for 5G network infrastructure. Last year, Intel sold the majority of its modem business to Apple for about $1 billion, with Swan saying that the time that the deal would allow Intel to “[put] our full effort into 5G where it most closely aligns with the needs of our global customer base.”

Once the deal is approved and closes, Seoul-based SK Hynix will take over Intel’s NAND SSD and NAND component and wafer businesses, and its NAND foundry in Dalian, China. Intel will hold onto its Optane business, which makes SSD memory modules. The companies said regulatory approval is expected by late 2021, and a final closing of all assets, including Intel’s NAND-related intellectual property, will take place in March 2025.

Until the final closing takes places, Intel will continue to manufacture NAND wafers at the Dalian foundry and retain all IP related to the manufacturing and design of its NAND flash wafers.

As the Wall Street Journal noted, the Dalian facility is Intel’s only major foundry in China, which means selling it to SK Hynix will dramatically reduce its presence there as the United States government puts trade restrictions on Chinese technology.

In the announcement, Intel said it plans to use proceeds from the sale to “advance its long-term growth priorities, including artificial intelligence, 5G networking and the intelligent, autonomous edge.”

During the six-month period ending on June 27, 2020, NAND business represented about $2.8 billion of revenue for its Non-volatile Memory Solutions Group (NSG), and contributed about $600 million to the division’s operating income. According to the Wall Street Journal, this made up the majority of Intel’s total memory sales during that period, which was about $3 billion.

SK Hynix CEO Seok-Hee Lee said the deal will allow the South Korean company to “optimize our business structure, expanding our innovative portfolio in the NAND flash market segment, which will be comparable with what we achieved in DRAM.”

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US charges Russian hackers blamed for Ukraine power outages and the NotPetya ransomware attack

Six Russian intelligence officers accused of launching some of the “world’s most destructive malware” — including an attack that took down the Ukraine power grid in December 2015 and the NotPetya global ransomware attack in 2017 — have been charged by the U.S. Justice Department.

Prosecutors said the group of hackers, who work for the Russian GRU, are behind the “most disruptive and destructive series of computer attacks ever attributed to a single group.”

“No country has weaponized its cyber capabilities as maliciously or irresponsibly as Russia, wantonly causing unprecedented damage to pursue small tactical advantages and to satisfy fits of spite,” said John Demers, U.S. assistant attorney general for national security. “Today the department has charged these Russian officers with conducting the most disruptive and destructive series of computer attacks ever attributed to a single group, including unleashing the NotPetya malware. No nation will recapture greatness while behaving in this way.”

The six accused Russian intelligence officers. Image Credits: FBI/supplied

In charges laid out Monday, the hackers are accused of developing and launching attacks using the KillDisk and Industroyer (also known as Crash Override) to target and disrupt the power supply in Ukraine, which left hundreds of thousands of customers without electricity two days before Christmas. The prosecutors also said the hackers were behind the NotPetya attack, a ransomware attack that spread across the world in 2017, causing billions of dollars in damages.

The hackers are also said to have used Olympic Destroyer, designed to knock out internet connections during the opening ceremony of the 2018 PyeongChang Winter Olympics in South Korea.

Prosecutors also blamed the six hackers for trying to disrupt the 2017 French elections by launching a “hack and leak” operation to discredit the then-presidential frontrunner, Emmanuel Macron, as well as launching targeted spearphishing attacks against the Organization for the Prohibition of Chemical Weapons and the U.K.’s Defense Science and Technology Laboratory, tasked with investigating the use of the Russian nerve agent Novichok in Salisbury, U.K. in 2018, and attacks against targets in Georgia, the former Soviet state.

The alleged hackers — Yuriy Sergeyevich Andrienko, 32; Sergey Vladimirovich Detistov, 35; Pavel Valeryevich Frolov, 28; Anatoliy Sergeyevich Kovalev, 29; Artem Valeryevich Ochichenko, 27; and Petr Nikolayevich Pliskin, 32 — are all charged with seven counts of conspiracy to hack, commit wire fraud and causing computer damage.

The accused are believed to be in Russia. But the indictment serves as a “name and shame” effort, frequently employed by Justice Department prosecutors in recent years where arrests or extraditions are not likely or possible.

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BTS’s Loyal Army of Fans Is the Secret Weapon Behind a $4 Billion I.P.O.

It’s 10:30 on a Monday night, and Ashley Hackworth is putting the final touches on a personal project to make the world’s biggest boy band a little bit bigger.

Ms. Hackworth, who teaches English in South Korea, is on a Zoom call with five other fans of the Korean pop group BTS, planning a virtual meet-up for followers. An online game for the event still needs work. Someone has to reach out to local radio stations about media coverage. And who can contact potential sponsors?

Their fan group will not be paid a dime for promoting the band. But without their efforts, and those of a vast network of other hyper-dedicated fans, the Korean company that manages BTS, Big Hit Entertainment, would not now be a multibillion-dollar enterprise.

On Thursday, shares in the company will begin trading in South Korea, capping off the country’s most hotly anticipated initial public offering since 2017. Institutional and retail investors across the world scrambled to get a piece of Big Hit before the listing, with hundreds of pre-orders for every share. Big Hit, which reported a profit of $86 million last year, is valued at around $4 billion, after raising more than $800 million by offering investors about 20 percent of the company.

Naturally, there are some concerns about an enterprise whose main product is a boy band — a creation not known for a long shelf life. For now, though, many investors see the listing as a golden opportunity, amid a global recession, to own a slice of a musical phenomenon that was the world’s most lucrative touring act last year and, by one estimate, adds more than $3.5 billion annually to South Korea’s economy.

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Credit…Jean Chung for The New York Times

But what these investors are really paying for is not necessarily Big Hit or even BTS. It’s a huge and highly connected ecosystem of fans like Ms. Hackworth with a deep, even life-changing, attachment to the group and its message of inclusivity and self-love.

BTS supporters, who call themselves the Army, don’t just attend concerts or buy the band’s seemingly endless stream of merchandise (although they do plenty of that). They have organized themselves into groups that perform a host of services on the band’s behalf, from translating a fire hose of BTS content into English and other languages (applications required, experience preferred) to paying for advertising and running highly coordinated social media campaigns.

Big Hit’s biannual corporate meetings receive millions of views online from hard-core fans, who scrutinize business strategy. And like any good company, the Army is obsessed with metrics: One Twitter account, @btsanalytics, which pumps out bone-dry data on album sales, YouTube views and music streaming numbers, has more than 2.5 million followers. Fans use the numbers to set, and follow through on, ambitious goals for BTS song and album releases — an approach intended to help the band climb the global charts.

Fans also look out for other fans. Lawyers educate followers about legal issues. Teachers offer tutoring. And as Big Hit’s I.P.O. approached, those with investment backgrounds started online chat groups to counsel less financially savvy fans on the ins and outs of investing in the company.

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Credit…Jean Chung for The New York Times

“We’re Army Incorporated,” Ms. Hackworth, 30, said during a recent interview from her apartment, where the group’s posters and seven branded baseball caps, one for each member, decorated the walls. The fan group functions like any company, she joked, although “no one is in charge of us, really, and we don’t have a C.E.O. unless you consider that BTS.”

The Army, whose name stands for Adorable Representative M.C. for Youth, is often depicted as a group of screaming teenage girls. The reality is different: While its demographics are hard to pin down — many members seem to be women in their 20s and 30s — the band’s fan base is broadly diverse, cutting across lines of gender, age, religion and nationality.

Compared with fan groups that have come before them, BTS’s followers are “so much savvier and strategic and smarter than what we’ve seen, especially in taking advantage of and utilizing platforms like social media to really achieve their goals,” said Nicole Santero, a Ph.D. student at the University of Nevada, Las Vegas, who has conducted extensive research on the Army.

BTS — whose name is an abbreviation of the Korean words Bangtan Sonyeondan, or Bulletproof Boy Scouts — has won a large following with its boyish good looks, slick dance moves and catchy music, spanning genres from rap to disco.

But what fans really respond to is the band members’ carefully cultivated and inspirational story of fighting their way to the top of the music business while staying true to themselves, Ms. Santero said. Their emotional openness and focus on mental health make fans “feel that BTS represents something that has impacted them and changed their lives, so supporting them is sort of their way of giving back to the group,” she said.

That devotion has allowed Big Hit to make BTS, which declined a request for an interview, into something more than just a band or even a brand. It is also a kind of lifestyle product, incorporating a dizzying array of content and merchandise, from variety shows to web comics, from video games to Korean-language courses. Its language textbooks are taught at Middlebury College and the École Normale Supérieure, one of France’s most prestigious graduate schools.

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Credit…Jeong Eun Song

One of Big Hit’s early innovations was to provide fans with hours of video showing the group’s members going about their daily lives — eating, working out and even just relaxing — creating an unusual level of intimacy with their followers.

Big Hit’s approach, which it describes as offering “music and artist for healing,” has set it apart in an industry notorious for coldly rational business calculations and paternalistic treatment of artists. Most of Big Hit’s Korean competitors build musical groups from the top down, recruiting thousands of trainees annually and spending years drilling them in singing, dancing and public comportment.

But Big Hit bet that fans would prefer human vulnerability to superficial polish. While the company is fiercely protective of BTS’s image, it describes itself as the group’s partner, and it has given the band members a degree of freedom uncommon in the world of corporate K-pop.

The Army has embraced the image projected by the company and its founder, Bang Si-hyuk, a longtime music producer who in 2010 discovered BTS’s leader, RM, then a 16-year-old underground rapper, and built the group around him. Fans view Mr. Bang as a doting father figure who raised the men from obscurity and supports their interests, whether that means making albums with references to Carl Jung or starting an initiative to promote contemporary art.

In the lead-up to the I.P.O., Mr. Bang demonstrated his commitment to treating the BTS members as equals by giving them more than 478,000 of his own shares in the company. Army members applauded the move, although some questioned whether Mr. Bang — who holds 43 percent of the company and is set to be worth nearly $1.4 billion — should have given the men more.

He would do well to keep the group and its fans happy. BTS accounted for almost 88 percent of the company’s sales in the first half of 2020, down from more than 97 percent during the same period the previous year.

That dependence on BTS is investors’ biggest concern. The normal worries that a company might have about any pop group — like the possibility of its breaking up or leaving the label — are exacerbated in South Korea by the country’s mandatory 18-month military service for men. Barring a change in the law or a deferment, BTS’s oldest member will have to report for duty as early as the end of next year, with the other members close behind.

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Credit…Jean Chung for The New York Times

Big Hit has tried to reduce those risks by diversifying. It now has five acts in addition to BTS. More important, it has positioned itself as a “content creator” in the vein of Disney, with BTS essentially playing the role of Mickey Mouse — a priceless intellectual property that can be spun off in almost limitless directions.

That means projects like the BTS Universe, a fantasy world populated by fictional versions of the band. The concept is similar to Disney’s approach to the Star Wars or Marvel Comics franchises, drawing fans into a constantly expanding cosmos of new content and merchandise that can eventually accommodate Big Hit’s other musical acts.

The company has also built its own social media platform, WeVerse, a commitment to digital content that is already paying off. Big Hit has increased its revenue sharply in 2020 even as the coronavirus forced BTS to cancel its sold-out world tour. Over the weekend, the group held a two-day online concert through WeVerse for which it sold nearly a million tickets, costing at least $43 each.

The concert rode the band’s success on the music charts. In early September, thanks to a push by the Army, BTS’s first English-language single, “Dynamite,” debuted at No. 1 on Billboard’s Hot 100 — a first for a Korean pop group. On Monday, another of its songs, a remix of “Savage Love,” also debuted at No. 1, further raising the high expectations for Big Hit’s share listing.

Laksmi Astari, 22, an Indonesian student majoring in fashion design at Sookmyung Women’s University in Seoul, is planning to pool money with her sister and a cousin to invest in Big Hit — her first time buying stock.

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Credit…Jean Chung for The New York Times

She is not overly concerned about potentially losing the money. She sees shares in the company as a kind of merchandise that might one day pay for itself.

“I get to invest in idols that I like, and it allows me to stay connected to BTS,” she said.

For Big Hit, a lot is riding on whether it can persuade fans like Ms. Astari to channel their enthusiasm toward the company’s other acts.

It might be a hard sell. Ms. Hackworth and the other members of her BTS fan group said that while they were enthusiastic about the prospects for Big Hit’s share offering, they were doubtful that lightning could strike twice.

“There’s no replication,” Ms. Hackworth said. “There’s just one BTS and one Army.”