The China Angle: EA-Backed The9 Plans Casual Coup

In Gamasutra's latest China Angle column, Pacific Epoch's Shang Koo analyzes the implications of EA's investment in major Chinese firm The9, as the latter launches its latest MMO beta, and elsewhere, a Chinese court rules on whether virtual items have real monetary value. Soul of The9 Nation China's three Nasdaq-listed online game companies all announced first quarter earnings last week, but all three announcements were overshadowed by The9's announcement of an strategic investment from Electronic Arts and two The9 game licensing deals. Electronic Arts purchased around 15 percent of The9 for US$ 167 million, and gave The9 the license to operate its marquee online sports game FIFA Online. The9 also announced it has licensed online music game Audition 2 from Korea. Although rumors of the EA investment have been circulating for several months, the investment was still surprising, as it was a departure from EA's recent strategy of investing in content. Nearly all of The9's revenues come from its licensed MMORPG World of Warcraft, and the company's in-house content development capability is anemic. The two new games are The9's latest attempts to gain a foothold in China's online casual game market. The9's first attempt at the casual games market was in summer 2005, when it launched its first and only in-house developed simple MMORPG Joyful Journey West. The game is a simple 2D platformer based on China's literary classic Westward Journey. However, Joyful Journey West was unable to compete against first mover Maple Story, especially when Maple Story's Chinese operator Shanda Entertainment grabbed "Adventure Island" for the Chinese name to the game. Both FIFA Online and Audition 2 must challenge first movers for market share in China. Soccer is the second most popular sport in China, after basketball. With street basketball game FreeStyle already the most popular sports casual game in China, FIFA Online will likely play second fiddle to FreeStyle as well. Audition 2 must compete against its predecessor Audition in China. Audition is currently operated by 9you in China, with around 800,000 peak concurrent users. Based on Audition's success, 9you has aggressively marketed its brand. The company has been name sponsor for two TV music talent programs and has hosted numerous concerts in China as well. In the short term, The9's best hope of expanding its revenue sources beyond World of Warcraft is through Webzen's MMORPG Soul of Ultimate Nation (SUN) (pictured). The9 recorded 400,000 peak concurrent players for the game during open beta. Commercial operation of SUN started on May 24, under a free to play, pay for items model. Staff of a Thousand Truths Long ago, when MMORPG Legend of Mir 2 was created, it was designed for a subscription model. Faced with declining users in 2005, the game's operator Shanda made a drastic decision to make the game free and charge for virtual items. One of the programmers had too much imagination, and a special staff was created, called the 18 Magical Staff. A year later, a 28 year old gamer obtained the 18 Magical Staff through normal game-play. However, Shanda decided the item was too powerful, and soon deleted the item. The angry gamer took Shanda to court. In a landmark case, though, the court ordered on May 11th that Shanda to return the staff to the player, ruling that virtual items have monetary value. [Shang Koo is an editor at Shanghai-based Pacific Epoch, and oversees research and daily news content on China's new media industries, with a concentration in online games. Pacific Epoch itself provides investment and trade news and publishes a number of subscription products regarding the Chinese technology market. Readers wanting to contact him can e-mail [email protected].]