NetEase Profits Rise On Gaming Revenue
NetEase, one of China's leading Internet portals, reported
profits doubling on the popularity of its online gaming
services. NetEase posted a net profit of $11.4 million,
or 36 cents per basic ADR (American Depository Receipt),
in the fourth quarter of 2003 compared to $5.2 million
a year earlier. Netease is listed on the Nasdaq under
the NTES symbol.
Compared to Sina.com and Sohu, China's other two leading
Internet portals, NetEase has a stronger presence in online
gaming, and is weaker in online advertising. All three
companies relied on revenue from SMS (short message services)
to bring them up from their slump in the 2000-2002 period,
when all three were nearly delisted from Nasdaq because
of their low share price. Now, all three are trading between
$27 - 50 on the Nasdaq.
Competition in SMS has led all three companies to diversify
from that original revenue source. SMS revenue was shared
with mobile carriers, and all three have been careful
in revealing the terms of their contracts.
NetEase's most popular online game has been Westward
Journey Online Version 2, which had 120,000 concurrent
users in December, up from 100,000 in September. This
game was internally developed and maintained by NetEase.
Players pay US 5 cents an hour to play.
NetEase claims that it now at the end of 2003, it had
167 million accumulated registered users, compared to
95.7 million from a year earlier.
The main players in online gaming are Shanda Networking,
which will be going public on Nasdaq shortly, followed
by The9 Online and Kingsoft. Shanda Networking claims
1 million concurrent users. The company began by licensing
software from the South Korean firm Actoz. Since then,
it has started to develop its own games for launch in
the China market.
Following on these developments, and in preparation for
its listing, Timothy Chen Tianqiao has announced management
changes for Shanda Networking, bringing in the former
Microsoft China president.
In the US, Microsoft announced that it would end development
of the Mythica game which Microsoft Game Studios was developing.
Like all the games which have turned into revenue generators
in China, Mythica was a massively multiplayer online role
playing game (MMORPG). MMORPGs have become highly addictive
for players, and have the same effect Dungeons and Dragons
used to have in the 80s and 90s.
It is unknown if the curtailment of development had anything
to do with a lawsuit by Mythic Entertainment of Virginia,
which is developing Dark Age of Camelot. Unlike the Chinese
companies, Microsoft's game development is tied in with
sales of Windows and Xbox platform. Xbox is duelling with
Sony's Playstation II for leadership in the online gaming
field.
As long as Sony and Microsoft tie in their game development
with their hardware solutions, it will be hard to see
how they can become major players in the Chinese online
gaming market.
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