Shanda Chinese Profits Slide On MMO Decline

Chinese-headquartered MMO publisher/developer and hardware distributor Shanda, which is traded on the American NASDAQ market, has announced a major decline in profits for the first quarter of 2006, down to just RMB11.8 million (US$1.5 million) from RMB220.1 million in the first quarter of 2005. The company, which announced in 2005 that it would be making popular Chinese MMO games such as Legend of Mir II, as well as Magical Land and The World of Legend, free to play, but with players paying for in-game items, also showed declining overall revenues, to RMB341.4 million (US$42.6 million), representing a 31.3% decrease compared to RMB497.0 million in the first quarter of 2005. According to the company, online game revenues in the first quarter of 2006 declined 29.9% year-over-year and 0.7% quarter-over-quarter to RMB309.6 million (US$38.6 million) in the first quarter of 2006. Revenues from MMORPGs in the first quarter of 2006 decreased 32.0% year-over-year and 2.4% quarter-over-quarter to RMB225.2 million (US$28.1 million), apparently due to both the switch to 'pay for items', and the relative decline of popularity for Shanda's titles as games such as World Of WarCraft swiftly rise to power. Finally, the company's EZ Pod hardware, which is intended to be an inexpensive PC set-top box for consumers to buy games, movies, and other media though, continues to have issues in the market, affecting the company's results further. "Our first quarter financial results reflect stabilized online game performance as well as the continued development of our home strategy," said Tianqiao Chen, Shanda's chief executive officer. "We continued to expand the distribution platform for our EZ Pod through partnership with leading PC manufacturers in China such as Hewlett Packard. The transition in our core business this quarter following the introduction of an in-game item-based revenue model has proven to be relatively smooth. We remain confident for the long-term as a strong pipeline of MMORPGs and casual games is scheduled to debut throughout 2006."