On December 29, 2025, XD INC (02400.HK) announced that its wholly-owned subsidiary, XD Entertainment, has reached an agreement with relevant parties to acquire all intellectual property rights of the classic action role-playing game series Torchlight for $37.18 million (approximately 260 million RMB). This transaction not only marks the formal transfer of a 16-year-old Western game IP into the hands of a Chinese developer but also signals a strategic upgrade for XD INC, shifting from "licensed operations" to "IP-led" globalization.
A unique aspect of this acquisition lies in its payment method—XD INC completed the transaction through debt offset. In November 2025, XD had provided a $40 million loan to the newly established company Golden Arc to assist it in acquiring assets such as Arc Games from the Swedish gaming giant Embracer Group. The $37.18 million cost for this IP acquisition was realized by offsetting this loan debt, requiring no additional consumption of cash reserves. This design alleviates funding pressure while securing IP control rights in advance, demonstrating a sophisticated capital operation.
In terms of valuation, the transaction referenced an independent appraisal report valuing the IP at $37.354 million, calculated using the income approach with an 8% royalty rate discount. While this price carries a certain premium compared to the historical performance of the Torchlight series, XD INC places greater emphasis on its long-term synergistic effects. Since the launch of XD's self-developed Torchlight: Infinite in May 2023, the IP has contributed stable revenue to the company. Following the full acquisition, the company will eliminate royalty payments to external IP owners, directly boosting game profit margins.
The Torchlight series has had a tumultuous history. The first title was launched in 2009 by Runic Games, founded by former members of Blizzard's Diablo team, and quickly became an ARPG benchmark with its steampunk art style and loot-driven gameplay. Subsequently, the IP changed hands multiple times: it was acquired by Perfect World for $8.4 million in 2010, sold along with a subsidiary to the Embracer Group in 2021, and then put up for sale again in 2025 due to Embracer's strategic contraction.
XD INC had already begun involvement in the IP's development through a licensing partnership as early as 2019. Its self-developed Torchlight: Infinite, built with the UE4 engine and employing an "overseas-first, then domestic" release strategy, consistently ranked high on Steam's best-seller list after launch, with overseas revenue accounting for over 60%. This acquisition elevates XD's role from "operator" to "owner," granting it all assets including source code, trademarks, and social media accounts, thereby laying the groundwork for cross-platform adaptations.
Behind the acquisition is XD INC's deep commitment to the ARPG genre. In 2024, XD returned to profitability with a net profit of 812 million RMB, and its net profit for the first half of 2025 surged by 268% year-on-year. This performance growth primarily relies on the synergy between its self-developed games and the TapTap platform. Torchlight, as the company's first major UE4-based PC client game, has been positioned as a representative "evergreen game."
XD CEO Dameng Huang has previously stated that future resources will be focused on products with evergreen potential. Following this acquisition, the company plans to extract value from the IP in three ways: First, maintaining the stable operation of the existing PC game series (Torchlight I-III); Second, continuously iterating seasonal content for Torchlight: Infinite (such as the SS11 season launched on January 16, 2026); Third, planning for new titles in the medium to long term, while emphasizing that it "will not be rushed."
However, reviving a classic IP is no easy task. Entertainment industry analyst Shule Zhang points out that while Torchlight is a quality IP, it has long occupied a "quasi-first-tier" position and requires sustained investment to break through. Furthermore, XD INC faces the inherent challenge of coordinating its platform and content—while the TapTap platform attracts developers with its "zero commission" policy, its proprietary game portfolio still needs strengthening.
This acquisition also reflects the evolution of Chinese game companies' overseas expansion models. By utilizing loan financing instead of direct acquisition, XD has reduced the risks associated with cross-border integration through a debt relationship, while retaining priority cooperation rights for other IPs like Neverwinter and Star Trek Online. This capital-light model of "leveraging capital to acquire IP" provides a new paradigm for global strategic layout in the industry.
The acquisition of Torchlight is a critical step in XD INC's transformation from a game distributor to an IP holder. While major Western studios are contracting, Chinese capital is activating the value of classic IPs through refined operations. Nevertheless, the ability to convert 16 years of player nostalgia into sustainable commercial returns will test XD INC's long-term operational capabilities. With the IP's formal transfer completed, this trans-Pacific experiment in merging capital and creativity is about to enter its practical implementation phase. Note: This article was generated with the assistance of AI tools and does not constitute investment advice. Markets involve risks; investment requires caution.
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