An Exploratory Study on the Valuation Approaches in the International Game Licenses

This study empirically examines the intangible asset valuation approaches used in the process of online game license agreements. During the 2001~2004 period, fifteen Korean online games published in China under license agreements are used as samples. Smith and Parr(2000) argue that the appropriate valuation approach used for game software is the income approach. Contrary to their argument, Korean developers marginally prefer the market approach while Chinese publishers, the income approach. In addition, at the earlier time, both parties used the market approach more than they used it at the later time. In particular, at Korean party the earlier time heavily depended on the market approach(84%) whereas Chinese party at the later time also heavily depended on the income approach(88%). It is due to the information asymmetries between the two parties about prospects of Chinese game market. It is concluded that the contents and quality of information obtained by licensors and licensees play an important role in selecting the intangible valuation approaches.