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

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?

[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?

[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...

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.

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.