Special: The State Of The Chinese Game Biz - Part 1

In the first of a series of reports this week on the Chinese video game market, I've been lucky enough to be able to make it out here to Shanghai, in order to both visit the ChinaJoy game expo (later in the week), and to hold meetings with a number of game companies doing business out here. On the way to my hotel from the airport, it's clear that Shanghai is the in the midst of a significant boom - massive new multi-level apartment buildings in various stages of construction dotted the side of the road on the way from the Pudong Airport. And, even though the roads were populated with a combination of souped-up BMWs and trucks containing pigs or watermelons, the amount of tech companies setting up in the industrial parks along the way showed this is, in many ways, a rising force. But why should you care about what's going on in China? There are two major reasons, and we'll deal with the first in this initial article - the Chinese game market itself. The Chinese population is proving to be a voracious consumer of both PC casual games and MMO titles, with the gigantic success of World Of Warcraft in the country (China is a significant percentage of the MMO's overall 6 million worldwide userbase) the most prominent example. From The West To The East Multiple other Western-created MMOs, including Hellgate London, EVE Online, and Guild Wars have also been licensed for the Eastern market. In addition, there are a growing number of Chinese-authored MMOs which could eventually potentially be monetized effectively in the West, play style or cultural differences notwithstanding. In a recent study, a report from iResearch reveals that China's online game revenues will reach $970 million in the next year, up 28%, as Chinese consumers continue to flock to both MMOs and casual game titles - though this money is clearly spread over almost the entire gamut of online gaming and a large amount of companies. It's The Growth, Stupid And, in a separate report from eMarketer named 'China Online', the analysts behind it note that China, with over 111 million Internet users in 2005, represents a huge potential online market. In fact, the market is due to grow to over 180 million Internet users by 2010 - and the China's overall population is more than 1.3 billion, according to some figures. Now, obviously, since the average yearly wage of Chinese urban employees is still between $1,000 and $2,000 - subscriptions for World Of Warcraft aren't $15 per month per user over here - this isn't necessarily yet an area where there will be stunning revenue amounts for most companies. However, in terms of a long-term bet, especially with the Chinese economy continuing to grow swiftly, it's clear that it's the domestic Chinese market is one that most major game companies want to be in. In addition, it needs to be in a way that the Chinese government feels comfortable with. Thus, we're seeing Electronic Arts moving its Pogo casual game service into China, and other companies such as Ubisoft building branch offices - though for other, development-related reasons that we'll get into in a subsequent report. Top Of The Heap? But who is really rising to the top in the Chinese MMO market? Late last week, independent research firm Pacific Epoch published the results of its most recent quarterly survey of China’s online games, which quizzed 1,550 Chinese online game players on their MMO preferences. In turn, analyst firm Bear Stearns communicated some of the highlights, as pertaining to some of the major Asian online game companies, in a research note. So, you'll probably want to go get the full Pacific Epoch report if this is information you need in detail, Bear Stearns noted that the The9-distributed World of Warcraft remains the most popular MMORPG in the survey, though "user growth trends may be slowing down relative to other quarters". It also seems to have lost few users to new titles such as Shanda's free-to-play MMORPG Archlord. Also notably important is Netease’s key MMO Fantasy Westward Journey, but the report indicated that the title may have finally peaked in the last 3 months - the Bear Stearns analysts think that Pacific Epoch's data reflects their current forecasts of a slight decline beginning in 4Q06. As in the Western market, consumers' attitudes to MMOs shift gradually over time, as the 'new fresh thing' comes to market. The Blind Warrior Talking of attitudes to games in China, one of the first things that I saw here when I reached my hotel room and opened the English-language Shanghai Daily newspaper was the following headline: 'Internet war games blind warrior'. According to reporter Xu Qin: "Xiao Yu, an Internet war game addict in Beijin, became blind due to a detachment of the retina after obsessive Internet playing. His parents sent him to the hospital on July 11." Qin continues: "Ever since the summer holiday began, Xiao Yu, a senior high school student of 16 or 17, had spent more than 10 hours a day playing an online game called 'World Of Warcraft'. The sudden loss of his vision ended his computer gaming on the Internet." The article goes on to cite China Youth Association statistics claiming that, of the 16.5 million 'junior Netizens', that is, young Internet users, around 13 percent between the ages of 13 and 17 suffer from 'Internet Addiction Disorder', and another 13 percent "is vulnerable to addiction". Conclusion Though it's clear that there's a lot of positive reaction to the swift growth of video games and gaming culture in China, articles like this one, which advocates that "the authorities should set a violence scale for the games and ban net bars that admit youth under 18", show the major concerns in the country. The Chinese government itself, which has previously instituted mandatory play limits coded within Chinese MMO games, and are heavily involved in helping to fund and create MMO titles deemed culturally suitable for the populace, are also keen to enforce this. Overall, though, the Chinese market is ripe for growth, both in native online gaming fields, and also in terms of inexpensive outsourced work and branch offices (art, code, and even full game production) from major Western game publishers and developers. How will this affect Western game creators, and how will it change the global game creation market place? This is the other major theme I'll be tackling this week in my reports from the country. [Gamasutra and Game Developer magazine editorial director Simon Carless will be reporting from Shanghai all this week on the Chinese video game market, talking to the key players about both the homegrown casual/MMO markets, and discussing the increasing amounts of game development outsourcing in the region.]