Digi-Capital: China Could 'Dominate Global Games Market'

Author: by Staff

With keen execution and a focus on profits and international investment, Chinese companies "could dominate the global games market," according to Tim Merel with investment bank Digi-Capital. "We believe the data backs us up," said Merel of Chinese gaming dominance in a new Gamasutra feature. He added that online and mobile games will make up about half -- or $44 billion -- of the total video game market's $87 billion by the end of 2014, and China is poised to take a large piece of the pie. Meanwhile, "the historically strong pure console sector" will be flat to down. Merel explained, "Asia Pacific and Europe should take 90 percent revenue share for online/mobile games (China 49 percent, Europe 17 percent, Japan 14 percent, South Korea 11 percent in 2014F), although North America remains important." "China's domestic strength has produced high volume (companies like Tencent deliver up to 20 million peak concurrent users -- a population the size of Australia at one time), low Average Revenue per User, cost efficient online/mobile games businesses with up to 50 percent operating margins, enabling significant investment in foreign markets," said Merel. "Speaking at the Shanghai World Expo and GDC China last year, and interviewed by CCTV this year, I was struck by the singleminded focus and drive of the Chinese games companies I met," he said. "Their approach is analytically driven and commercially balanced; they understand how to make substantial profits while growing revenue at scale, and they are hungry for more." Merel said he expects Chinese game companies to be "major games consolidators in 2011 investing in, acquiring, partnering and licensing from the strongest international online/mobile games companies." For much more valuable insight, stats and graphs from Merel on the global games market, read the full Gamasutra feature, available now.