Chinese Online Gaming Market Continues Expansion
Chinese Gamer, a Taiwan-based online gaming corporation,
is the latest entrant to the hot online gaming market
in China. The company is in discussions to license its
games to Sina.com, Sohu and Netease, China's three largest
online portals.
The company says that it has been US$500,000 for a two-year
license to "Love Box", a game aimed at young
girls. Formerly, the company acted as an operator in China,
but it has since changed to a licensor model. Other Taiwan
companies are also eyeing the Chinese market as their
single largest source of revenue because of its huge and
growing user base.
The online gaming market in China is estimated to grow
100% in 2004.
Shanda Interactive Entertainment (Nasdaq: SNDA) is the
largest single player in China, and claims to have more
than 1 million users playing games online at any single
moment. Each player pays approximately US 3 cents an hour
to play the leading game title, the Legend of Mir II,
and other game titles.
For China's internet portals, online games represent
an important revenue diversification strategy. All of
the portals, which are listed on Nasdaq, have rebounded
nicely in revenue and share price from the lows of 2001
by adding SMS mobile phone services. These deals were
made with China Mobile and other mobile carriers, and
involved revenue splits. Since the structure of the deals
rely on their carrier partners, all of the portals have
sought to bring in other revenue sources, and lessening
their reliance on SMS.
Among the portals, so far, Netease
has been most aggressive, choosing to develop its own
titles in-house.
The rapidly growing online gaming environment in China
has fostered its own companies, and many of China's domestic
computer makers make servers which are optimized for serving
online games. These systems have optimized graphics processing
speed and bandwidth capability to support multiple users.
So far, the leading computer maker in this field is Wave
Computers.
So far, Sony, maker of the Playstation II, and Microsoft,
maker of the X-box, have been unable to capitalize on
the online gaming market in China, and have not developed
their own titles. Their main concern is fear that their
titles, which are tightly wrapped with their hardware
solutions, will be pirated in China. Online gaming operators
in China prosper because they do not charge users for
an up-front investment in hardware, and because the games
are served from their servers, there is no fear of piracy.
The failure of Microsoft's X-box development efforts in
China became evident when the president of Microsoft China
joined
Shanda as CEO.
Shanda went public in May, after scaling back its initial
offering due to poor performance by other Chinese
companies going public. Since then, the market has come
to realize that online gaming in China is an impressive
performer, and has clawed its way back into positive territory.
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