The article shifts to how games are developed in China. A lot of the times they are blatantly copied. I've seen it first-hand. It's unfortunate, but that's how they develop a lot of products, and not just with computer games. Walk any of the major market centers and someone will flash you a handful of copied operating system software packages for a "new laptop" he also wants to sell you.
Russell points out several options the Chinese game industry has to grow, including expanding into the TV/Film industry, as well literature-based projects. In the end, it will depend on how the Chinese game industry adepts to its current problems of piracy and respect to original IP. If they can succeed in creating a long-term solution that is foreign-business friendly, the industry will take off.
China’s online gaming industry has exploded into a multi-billion-dollar business in the past few years, fueled by growing numbers of young Internet users. Yet growth appears to be slowing. iResearch, one of China’s top Internet market research companies, says revenue growth industry rose only 8.8% in the second quarter of this year, down from about some 30% for all of last year. What’s ahead for the industry? Forbes talked to Xufeng Zhao, a senior analyst at iResearch. Excerpts follow.
Forbes: China’s online gaming industry industry has been enjoying double-digit growth for many years. Will it continue?
Zhao: You can look at the industry outlook from several points of view. Technologically, China is behind other countries. Marketing is about average. Companies’ understanding of customers is relatively low. Therefore, a reason why the industry has been growing has been because of growth in the population of online game players.
But that isn’t going to be growing as fast. Mao Zedong once talked about “glorious mothers,” and encouraged a lot of births. That has helped to increase China’s population from 400 million to more than a billion. Starting around a decade ago, it created a great opportunity for the online game industry, as children became old enough to play. Demand has been great, and companies didn’t need to think too much about content.
Now, those same people that had time to play games for so many years are older. They are getting married, and having kids. They’re under a lot of pressure. You need time to play games, and they don’t have time. My husband loves to play games, but he has no time. Even if the ads for these games are great, people don’t have time. The number of younger players isn’t likely to replace the number of older people that played a lot but no longer have much time. Growth in the industry is going to be slower.
Q. What companies are going to outperform?
A. We have to think of things in terms of first-, second- and third-tier companies. The third tier is companies that just copy others’ games. If you spend 500,000 RMB for a game, I’ll copy you and spend 50,000 RMB. It doesn’t take much money. Second-tier companies are thinking about their own brand, and whether they want to spend to have their own influence. First-tier companies have their own games and integrated production.
Q. Which companies in China are better positioned to succeed?
A. Companies that can integrate from games into other types of entertainment and platforms will perform best, but nobody knows the best way to do it. Disney has had success, but the starting point for companies here is different. Shanda has made many investments, and is trying. But will they succeed? It isn’t inevitable that they will.
Q. Companies such as Perfect World have been talking about expanding into films. What are the prospects?
A. Revenue for online gaming companies right now totals around 20 billion yuan annually. For films, it’s a growing but relatively small number. I’m not saying that gaming companies can’t make money from films but it will be relatively small and it will just be a way for them to package their games and other content.
Q. What will come of efforts by companies such as Shanda to create a literature business?
A. Whether any literature is successful will depend on how it’s ultimately packaged. It’s not only the value of any literature itself that involved. If Shanda only generates money from one-at-time sales, then it will be a failure. The greatest value from literature is that it is an invisible asset. The real question is how you can later integrate it into your production chain. How can you create more value from something that starts out as a book? So for Shanda, what I can say at least for now is that they are trying to do that — integrate. They are ahead of others.
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