NEWS - Thursday, October 7, 2004

China To Lead World in Online Gaming

The results are in and China appears to be the clear winner. By 2007 it is expected that China will be the nation with the largest online gaming market. Companies are starting to realize this and are quickly making efforts to gain a foothold in the Chinese market. EA apparently will be right there to reap the benefits. That and more within... A recent report published by Game Trust and The Diffusion Group called "The China Online Gaming Report," states that China, the nation with the world’s greatest population, is set to become the online gaming market leader by 2007. According to research firm International Data Corp. (IDC), excluding Japan, the Asian online gaming market was worth an estimated $761.5 million last year; the market is expected to grow about 19% annually to $1.84 billion by 2008. Out of that $761.5 million, China’s value was $159.7 million last year, and analysts expect it to grow at twice the regional rate to $823 million by 2008. The Chinese connection Currently, China has about 80 million Internet users, 15 million of which have access to broadband. Consequently, the online gaming boom is taking off in the Far East and it doesn’t look like it’s slowing down anytime soon. Adeo Ressi, CEO of Game Trust, said, "Presently, China is the largest online gaming market on a per capita basis but not by dollar volume. As the China gaming marketplace rapidly matures, we expect that economic growth will rise in accordance with Western models. Network gaming comprises one of the largest opportunities in the Chinese Internet services market." He added, "Based on everything that we have learned through this unprecedented research, we believe that 80% of the Internet’s content will be in Chinese in ten years." Better brush up on your Mandarin, folks. Playing games is serious business. The study found that Chinese people who have net access spend roughly 12.3 hours online each week and that games and entertainment are the second most popular online activity, next to email usage. Specifically, 84.3% of Internet use email and 15.9% play online games. Additionally, 37.8% of wired households were found to have made an online purchase—an important figure to keep in mind if online games are to be purchased right at home from the computer. One of the reasons network games have become so popular as of late is that there hasn’t been much else for gamers to turn too. Companies like Nintendo and Sony who are reluctant to release their respective consoles due to the nation’s piracy problems, for the most part, have shunned the Chinese market. Additionally, many Chinese youth actually prefer the pay-as-you-go model for online games, rather than spending much more on consoles and console software. You’ll often find Chinese gamers in Internet cafes, playing these online titles for hours at a time. Dividing the pie The Chinese gaming market has also been largely dominated by Korea. Many of the more popular games being played in China are Korean imports. That is expected to change, however, as more Taiwan-based companies and other new entrants look to gain market share and take advantage of the online boom. Michael Greeson, president of The Diffusion Group, commented, "More and more competitors are entering this burgeoning market. As this happens, business models will morph and new value-chain entities will emerge. In turn, this will provide new sources of game content and services and ultimately threaten the existing Korean monopoly of the Chinese online gaming market." Here comes a new challenger Perhaps not surprisingly, the world’s largest video games publisher, Electronic Arts, is one of the new entrants to the Chinese online gaming market. A recent Reuters article reports that EA is planning on making China its "global center for developing online games, with a 500-person studio that will help it generate $1 billion in Asian revenues by 2010." EA has appointed Erick Hachenburg as the company’s China general manager. He said, "The plan for the studio is that as we build the business, we’re going to have to build the games locally. As we survey the world, it’s clear that China is going to be the biggest and fastest-growing online game market." Hachenburg also points out that they’re seeing, for the first time, a business model in China that lets customers pay for online games. EA wants to be a part of that. According to the Reuters report, EA has not yet completed its plans for the studio and is currently still in talks with Chinese officials. However, once the plans are set and EA takes the plunge, it could potentially enter into a joint venture with a local game designer or purchase one outright to help get development underway faster. EA hopes to have 500 employees working at the studio by the end of the decade. While China has definitely become a hotbed for online revenue, it should be noted that all of Asia has a lot going for it. Jon Niermann, EA’s Asia general manager, told Reuters that although China appears to be the frontrunner, "there’s upside for EA in all Asia, including Japan." He said, "We have an objective to build Asia into a billion dollars (in annual revenues) by the end of the decade."

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