Fighting For the Chinese Gaming Market

bart_scriv writes "While lots of ink is being spilled on the Wii/PS3 war, the real battleground for gamers may be in China, where companies Shanda and Netease are fighting for supremacy in the world's largest potential gaming market. The article looks at the companies' dramatically different business models (traditional subscriptions vs. virtual item sales), and offers screen caps of the companies' most popular online games: 'China is even expected to surpass tech-happy South Korea next year as Asia's biggest gaming market. China's overall Internet user base is enormous — about 120 million this year and growing fast. Yet it's a business in flux, and there is a huge debate among companies in this arena about whether to stick to a subscription fee model or go with a free-to-play one to build up a huge online consumer base. The lost revenues would be more than made up by sale of virtual goods (such as ammo for avatars, and so on) and also music and online movies to the legions of gaming fans attracted to its site — or so the theory goes.'"

Comments

shanda

[operato]

shanda have a habit of ripping games off made by the koreans. one example would be the game legend of mir made by the koreans. bleh.

What.

[nonorganon]

Just give them back all those 300-in-1 NES cartridges back.

Doesn't China just pirate stuff?

[CrazyJim1]

Except for MMORPGS where they farm gold, don't they play all emulated games? In a culture where 50 cents an hour is good pay, I don't see people shelling out for $10 or up software.

Re:Doesn't China just pirate stuff?

[RobertinXinyang]

I live in China. First off, 50 cents an hour is not considered good pay. A teacher will make anywhere from 800 to 1500 RMB per month. 1 RMB =~ 7.97 USD. That having been said, I regularly see PC games for sale between 10 and 12 RMB. This is not just in some covert shops, this is in major supermarkets. It is widly recognized that the software is pirated. However, that dos show the price that people are willing to pay

I tend to feel that the software pirating issue will never be solved here untill something is done about DVD regional encoding. If you purchase a ligitimate DVD (and I have many) it is a real toss-up if you will be able to play it due to regional encoding (what plays on my laptop may not play in my classroom, or on a friends DVD player). However, if I purchase a pirate copy, that has the region codes removed, it will play where ever I want to play it. The need for DVDs' to be pirate copies in order to be sure that they will play is keeping the entire counterfit media culture afloat.

Solve the DVD problem and there may eventually be a market for software (so long as it is pricesd in the market [what people are able and willing to pay]). Untill the DVD problem is solved, the market place for counterfit media will continue to thrive and siftware will be available in that market.

Re:Doesn't China just pirate stuff?

[Sj0]

If this site is correct then you've got your exchange rate backwards, and a teacher makes about 189 US dollars per month. That's not very much...

Re:Doesn't China just pirate stuff?

[tolomea]

Is RMB different from CNY because if not then believe you mean 7.97 RMB =~ 1 USD. So the teacher in your example is getting paid 100-200usd a month which is 0.6-1.2usd an hour and the games are selling for 1.2-1.5usd.

Re:Doesn't China just pirate stuff?

[RobertinXinyang]

Yep, I had it backward. It is still more than 50 cents an hour.

Re:Doesn't China just pirate stuff?

[The Lone Man]

Which, correct me if I am wrong, is around the same ratio of $/hr to $/game as it is in the States?

Re:Doesn't China just pirate stuff?

[Sj0]

Not by much. Assuming 5 day workweek at 8 hours a day, that works out to about 22 days work in a month, works out to about 8.60USD per day, or 1.02/hr.

And that's for a teacher, who is educated. If china is like most places, you can do a lot worse than being a teacher.

Re:Doesn't China just pirate stuff?

[AlXtreme]

Thanks. I was already packing my bags when I calculated that a teacher would earn $12000/month. Hell, I'd even learn to use chopsticks for that kind of cash...

Re:Doesn't China just pirate stuff?

[vega80]

FWIW, I read about a blog where an associate professor in Beijing was complaining that he could barely survive on 4954 RMB (~$600) / month..

Re:Doesn't China just pirate stuff?

[DNS-and-BIND]

50 cents an hour is 1100RMB per month, assuming a 40 hour workweek. Of course, being the China expert that you are, you know that everyone here works 6 days a week, and frequently more than 8 hours a day. Also, you have the conversion rate completely backward.

Let me guess, your legitimate DVDs were bought in America, Region 1? And China is Region 7. I wonder why they don't work...

Re:Doesn't China just pirate stuff?

[jamar0303]

Some DVD players bought in China are multiregion, so check for that if you move there.

Yep, China does just pirate stuff

[patio11]

That is why the only way to sell game software there is software-as-a-service (SAS), basically either subscription, item sales, or market-making models. (The last is similar to eBay or Sony's EQ2 system: you allow people to buy/sell items in your game but they have to share a percentage of the transaction with you.)

As long as we're tossing around numbers...

[FooAtWFU]

As long as we're throwing around figures and numbers and such... The World Bank's World Development Indicators 2005 estimates that one United States dollar was equivalent to approximately 1.8 Chinese yuan in terms of "purchasing power parity". So, that figure of 800 RMB/mo (to take the low estimate) is about equivalent to $222/mo in terms of what sort of Stuff you can actually buy with it. Of course, that means that also means that $10 =~ 78.65800 RMB is about equivalent to $43.70 in terms of what you'd need to give up to get it.

You may continue to draw conclusions. One thing this says to me is that it's looking a lot rosier for a Chinese company looking to get rich quick by selling stuff to Americans than vice-versa... or even for a Chinese company to sell stuff to Chinese... eh.

its simple

[Anonymous Coward]

don't allow unicode characters.

Re:its simple

[WilliamSChips]

I thought the Japanese were the ones with an almost religious aversion to Unicode?

Buy in-game items?

[Salvance]

Sorry for my ignorance, but are there games in the U.S. that are free to play, but you have to pay for in-game items? This sounds like a great business model for areas like China where many gamers may not have the cash for subscription or one-time fees ... I could see it working in the US too where some gamers would be willing to pay big bucks to bypass months of time getting to higher levels.

Re:Buy in-game items?

[patio11]

Puzzle Pirates has some servers which are free-to-play, but when you buy certain items (from other players, for in-game currency), you have to pay a delivery fee in a microcurrency. All the microcurrency begins its existence in the hands of the company that runs the game, Three Rings Design, and is sold to players for real money. From there it gets traded around for in-game currency/items and sunk from the economy as delivery fees and fees for badges (think elevated account privileges for a month). They also have other servers which are your standard one-price-fits-all subscription model, where the concepts of delivery fees and badges do not exist.

Re:Buy in-game items?

[Anonymous Coward]

The only US(?) based release I can think of that plans to turn free to play, pay to buy is http://bots.acclaim.com/index.htm but this may just be a port of some game unknown to me.

Re:Buy in-game items?

[Anonymous Coward]

I don't know if it counts, but Gaia Online uses that model - the service is free but you can buy items for your avatar in exchange for real money. It's more of a web forum than a game, but it does have some mini-games. The items don't give you any advantage in the games though.

Pretty much..

[fliptout]

I don't know how purchasing power parity is calculated. As an American living abroad, I had enormous purchasing power (yes, i know that is qualitative).

I do concur with your conclusion- only the richest Chinese can afford to buy American products, because there is always some shitty knock-off that is good enough. Plus, the lifestyle there is spartan for most people.

The most disturbing trend I see is all the technology transfer going to China: companies want to make their stuff cheaper, partner with an existing chinese company, then send their know-how and IP to China. All this making shit for a cheap price in Asia is going to bite all these people in the ass.

Re:Pretty much..

[FooAtWFU]

Purchasing power parity compares the amount of money it takes to buy (purchasing) a certain basket of the same goods (parity) in two different countries. It's useful when comparing relative incomes across countries. You often hear about how in such-and-such country many people only make something like $1 an hour - but you don't hear as often how much further a dollar goes there. In such places, you can usually get goods and services (like food and housing) for mere pennies on the dollar compared to what you can find in the United States. Mind you, most people in these circumstances are admittedly still rather poor- just not nearly as abysmally poor as you might otherwise think.

The details of the calculation are best left to people more skilled in the art of economics than you or I. You can read about it on Wikipedia.

"Red Blindness" article in The Escapist

[Allen Varney]

I wrote the article Red Blindness (link goes to text version) for The Escapist issue #49. It's about China's fast-developing MMOG scene, the quality issues they're wrestling with, and the prospects for future improvement. The article lists some of the online games made by Shanda, NetEase, and The9.

Re:"Red Blindness" article in The Escapist

[Kheng]

An interesting article, thanks for the link

My perspective

[DigiShaman]

Almost a full year ago, I was on a trip visiting someone in Shanghai. I found quite a bit of (WoW World of Warcraft) advertising on plastic Coke bottles. Based on other forms of advertising, I suspect the PC gaming market rules over consoles. I suspect its boost in popularity stems from the Internet Cafes so widely available.

Re:My perspective

[jamar0303]

If you looked more closely you'll find that most of the non-PC (console/portable) gaming is focused away from Nintendo because it's so hard to pirate. Even more so now with the PS3. Sony refuses to sell officially on the mainland so prices for imported PS3s here in mainland China are $1000-$1200US (last I read from a news source). At those prices are people going to pay $50 a pop for console games officially or are they going to pay $1 per game for pirated games? I'm going to get a Wii anyway- that's way more than I'm willing to pay for a game console.

Re:My perspective

[macshome]

Nintendo actually has a Chinese subsidiary called iQue. They sell variants of the GBA, DS, and N64 there. The iQue Player (N64) is pretty interesting as games are downloaded from kiosks into a flash cart. iQue Player. and iQue in general.

Re:My perspective

[jamar0303]

Right, I noticed. THe nasty thing about iQue, though, is that their version of the DS will only take Chinese DS cards (according to a review I read), thus encouraging the use of gray-market DSes (or flash cartridges and piracy) for those who want to play Japanese and US games.

i know why

[imkow]

,,
That's all im about to say