Sunday, December 12, 2010

Chinese exporting an increasing list of games

Games are one of the few mediums of entertainment in the West where the influence of the East has been profoundly felt. Nintendo, Sega, Square-Enix, and countless other Japanese game companies have been in the enviable position of actually shaping the tastes of western gamers for decades. Although that influence has waned—in fact, there has been much talk of a game development crisis in Japan—no one would bother denying that the way we game today owes as much to Japan as it does to native influences such as Atari, Activision-Blizzard, and Zynga.

And while Japan may be stumbling, no one questions that China is on the world superpower fast track. Could this be the next Eastern game industry giant? China is already the world’s largest gaming market, and an emerging tech powerhouse. The phrase “Chinese Exports” usually conjures images of plastic widgets slathered in toxic paint, but this is more of a PR problem than a fair representation of the state of Chinese product development. Anyone with real knowledge of the market forces (skilled workforce, relatively low wages, room for expansion, government support) knows that China is already on its way to being a major player in the tech industry worldwide.

But what of games? The truth is, the wave of Chinese game exports is already underway and has been growing steadily over the last four years. Starting from two or three companies exporting games in 2006, there are now dozens of major Chinese game companies involved, many of them operating multiple games overseas. And while the blistering pace of growth in the Chinese domestic game market has slowed recently, revenue earned by Chinese game companies in overseas markets continues to grow by as much as 20% annually. As such, overseas profits are becoming a major strategy focus as the domestic market grows more competitive.

The numbers don’t lie: they are among us. But, where exactly? We have yet to see a major Chinese gaming hit to focus everyone’s attention on this phenomenon, and even moderately successful games have often avoided branding themselves as Chinese, which further reduces visibility. But they’re out there. Social game developers Five Minutes and Rekoo have been able to boast millions of monthly active users on Facebook, while Taiwanese-produced Runes of Magic has garnered praise as one of the highest quality F2P MMORPGs available. Beijing-based Perfect World (Nasdaq: PWRD), perhaps the most aggressive and forward-thinking participant in this trend, has a whole slew of F2P MMO titles and a 150-employee marketing, service and operations center in Silicon Valley. Though Perfect World’s overseas revenues have flagged recently, they still hit USD 7.8 million in Q3 2010, accounting for 7.4% of the company’s total. On a more ignominious note, the oft-ridiculed yet highly profitable strategy web-game Evony is a Chinese product. So, be warned, the Chinese invasion is on, and promises to bring dozens, if not hundreds, of new titles into the twitchy hands of western gamers with every passing year.


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