Massively multiplayer online titles are the way to crack the piracy problems, and unlock huge revenues in China according to the analysts.
VIDEO GAME REVENUES FOR MASSIVELY MULTIPLAYER ONLINE GAMES MARKET IN
CHINA TO GROW BY 64% THROUGH 2006
OFFICIAL INTRODUCTION OF GAME CONSOLES FACES TOUGHER BATTLE IN CHINA DUE
TO SEVERE PIRACY RATE
San Francisco, CA - Dec. 10, 2003 - A recent study on the interactive games market in China by Niko Partners and International Development Group shows that the massively multiplayer online games (MMOG) market in
China is the only segment demonstrating resistance to piracy and thus shows a strong potential for revenue and profit.
The 2003 China PC, Video and Online Game Market Study identifies market size, areas for product expansion and the significant role of product piracy in undermining profits in some segments. It cites 2003 year-end projected revenues of $96 million, resulting from 7.4 million people playing one or more of the 110 existing games. Revenues should rise to $127 million by 2006.
According to Niko Partners and International Development Group, the development of the PC, online and video game market in China is uniquely framed by a huge potential customer base and the rampant use of pirated product. While there is a huge mass of target game consumers - 234 million people between the ages of 14 and 24 - 95% of video games and
96% of PC games are pirated. The estimated total sales of pirated PC games sold in China in 2002 exceeded $105 million, but at an average of just $1 per game.
"Because revenue from these games comes from a service rather than product itself, sales of game play are made via a sustainable business model that counteracts piracy and allows for predictable costs and profits," said Lisa Cosmas, Managing Partner of Niko Partners.
MMOGs are protected from piracy because revenues are generated by prepaid cards and by the purchase of extra virtual items for character enhancement. In mid 2003, the hard-core customer base of 370,000 played MMOGs at least 60 hours per month.
The MMOG model in China is different from that in the U.S. and the report shows how innovative models can generate revenue and work around the piracy problem. Chinese gamers have low-cost access to high-end PCs
in the approximately 200,000 Internet Bars. Each Internet Bar seats on average 100 to 300 people who spend $1 to play for 4 hours.
"Role-playing and strategy are two of the hottest genres," said Anton Bruehl, President of IDG. "Shooter games are not nearly as popular as they are in the West, and very few have entered the Top 10 lists of
either PC or console games in terms of legal units sold. However, with the introduction of Counter-Strike by Vivendi Universal Games in 2002, Chinese gamers have had an increased interest in the genre."
"This is a very exciting time for entering the games business in China," added Ms. Cosmas. "By the end of 2002, over 17 million households, a 4.8% penetration, owned a PC. Shipments of home PCs are expected to increase at a compound annual growth of 11% between 2002 and 2006. Game consoles have reached nearly the same household penetration (4.6%) in large part due to their much lower cost: consoles sell for $60 to $250; PCs average $500 to $1,200 with monitor. The challenge for game developers and publishers is supplying this enormous market while protecting revenues and profits."