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Everything to play for: Eyeing China's online games market
China's lucrative online gaming industry is attracting overseas companies keen for a share of the US$3 billion market
Editor's Note: For more on Chinese online gaming and ChinaJoy, read on at "ChinaJoy: The next generation of Chinese video games" and "Game on: Cosplay at ChinaJoy".
Aside from the hundreds of new games on display at ChinaJoy that ran from July 28 to Aug. 1 in Shanghai, there was also something else new -- more foreigners, specifically foreign gaming companies hoping to partner with Chinese companies to either import their games to China or export China’s games abroad.
They came from Australia, Russia, Germany, France, Japan, the United Arab Emirates and around 30 or so other countries, setting up booths at ChinaJoy, China’s largest gaming and digital entertainment exhibition (the country's answer to E3), and speaking at several gaming conferences held in conjunction with the event.
The [Chinese companies] want to do business ... It is the birth of a new market, really— Martin Wilkes, sales and business manager for Firelight Technologies
It is a trend that many say will only grow in coming years as foreign game developers and publishers want a piece of China’s lucrative gaming market, which was worth more than US$3 billion in 2009 according to Niko Partners, and as cash-rich Chinese companies like Tencent Holdings and Shanda Games try their luck in the West.
Tencent recently invested US$300 million in Digital Sky Technologies, the Russian Internet holding company that acquired a stake in Facebook last year, and Shanda Games, a subsidiary of Shanda Interactive Entertainment Limited, purchased San Francisco-based Mochi Media for US$80 million in January.
Meanwhile, Zynga, the San Francisco-based company known for its social networking game Farmville, acquired XPD Media, a social gaming company based in Beijing in May.
“There is a lot of stuff happening between the East and the West right now,” says Ludovic Bodin, co-founder and CEO of Cmune, a Beijng-based company that builds 3D games for social networks. “Everyone is trying to work with each other.”
Once considered mediocre at best, “the increased quality and technological complexity of online games made in China is fueling interest from foreign publishers hoping to help domestic developers release their products overseas,” says Carsten van Husen, CEO of the German-based online game publisher Gameforge.
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During the conferences, which included sessions on the global development of Chinese games and global social games and “their Chinese hopes,” Gameforge signed its first deal to distribute Warrior King, a MMO (massively multi-player online) game produced by Beijing-based LineKong Entertainment Technology, in the West.
“Korea has always been leading the industry but the Chinese are obviously very clever, creative and massive, so they are coming on strong,” van Husen says.
Yet while Chinese gaming companies have been investing internationally and there are a few examples of Chinese social network games that have been successful abroad (Sunshine Ranch, a SNS game developed by Rekoo, has performed well in Japan and the United State, for example), some say it will be a while before Chinese developers can make any major inroads in the West largely due to cultural divides and lack of market expertise.
There is a lot of stuff happening between the East and the West right now. Everyone is trying to work with each other.— Ludovic Bodin, co-founder and CEO of Cmune
“It will take another few years,” Bodin says. “For most of them, they are going to buy companies that are strong in [other] markets or can serve as a bridge between the East and the West.”
Cultural barriers as well as hard-to-navigate regulations, including a law passed last fall banning foreign investment in domestic online gaming operations, could also make it difficult for foreign game companies to enter China.
Still, there are those who remain determined to take a share of the world’s largest Internet population entrenched in a lucrative culture of online games.
“The Chinese market has moved dramatically in terms of technology,” says Martin Wilkes, sales and business manager for Firelight Technologies, a Melbourne-based company that provides audio solutions for video games. “Games have become part of the Chinese culture and will only increase in potential because of the size of the population.”
Wilkes was accompanied by 10 other Australian companies on a “Victorian Government ICT trade mission to Shanghai” to explore business opportunities in China.
“The [Chinese companies] want to do business. They are really eager and very approachable and very keen to talk,” he says. “It is the birth of a new market, really.”