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Column: 'The China Angle: Western Gamble On Casual China'

Column: 'The China Angle: Western Gamble On Casual China'

October 20, 2006 | By Shang Koo

October 20, 2006 | By Shang Koo
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The latest edition of Gamasutra's regular 'The China Angle' column has Pacific Epoch's Shang Koo taking a look at the West's attempts to make in-roads into the Chinese casual games market, when, analysts suggest, quite the opposite needs to occur.

The Casual Conundrum

"China has 34 provinces, provincial level cities, and autonomous regions. Each region has half a dozen or more known variants of Mahjong. For game developers that lack creativity, the abundance of Mahjong variants mean that they will never run out of casual games to develop for the China market.

The vast number of different variants also means that every province, city, and extended family unit in China can operate their own casual game platform offering unique local content consisting of known and unknown local Mahjong variants. Most regions are home to several casual game portals; few of them have significant traffic.

Despite the crowded playing field, several Western game companies have muscled into China's casual game market in 2006. Electronic Arts launched Pogo in China in July. Real Networks followed with its casual game portal a few weeks later. Dutch casual game company Spill Group is also making its presence known, and acquired Chinese casual game developer Zlong in September as part of its China expansion. Under Spill Group's ambitious China plans, the company will likely acquire other casual game developers or even Chinese casual game platforms in the near future.

Growth Problems For Some?

It's unclear how Spill Group's future acquisitions will change its China strategy, but the company's current strategy, as well as the casual game strategies of Real and EA, are fairly western-centric. Spill Group currently has around 3000 simple games on its Chinese platform game.com.cn, but no revenue sources. Eventually, the company plans to introduce in-game advertising and skill games using a point based system.

The only legalized gambling in China are state sponsored lotteries, so skill games face huge regulatory hurdles. However, if Spill Group can dance around the dangerous regulatory landmines, the company will gain access to a large population of rabid gamblers that has been looking for an outlet for decades.

Before Western companies like Spill need to worry about regulations, they must first figure out how to compete against China's giant portals. The biggest is Tencent's QQ Game platform, which is tied to its ubiquitous QQ instant messaging platform. QQ Game has replaced Microsoft Windows' Solitaire and Minesweeper as the most played and most easily accessible computer games available in China, with over 3 million peak concurrent players. Other popular casual game platforms in China are online game giant Shanda's Bianfeng, NHN's Ourgame, and several platforms by China's largest Internet portals Sina, Sohu, Netease, and Tom Online.

Export, Not Import Is The Key

With so many powerful local players in the casual game space, and hundreds of scavenger casual game portals fighting for the scraps, some industry veterans are questioning why Western game companies are trying to wedge themselves into China at all. According to Robert Vernick, CEO of Beijing based casual game developer Gamehub, Western game companies should not be bringing their casual games business into China, but rather taking China's casual game business to the West. "The casual game businesses in China and Korea are much more advanced than in the West," said Vernick.

Chinese casual game platforms, in particular QQ Games, incorporate advanced features such as virtual items, avatars, and social networking, which are needed to overcome the rampant piracy problems with downloadable games in China. The same features also allow for a business model and network effect that fill the gap between MMORPGs and the standard casual games business in the West. And then there are all those Mahjong variants waiting to be exported."

[Shang Koo is an editor at Shanghai-based Pacific Epoch, and oversees research and daily news content on China's new media industries, with a concentration in online games. Pacific Epoch itself provides investment and trade news and publishes a number of subscription products regarding the Chinese technology market.]


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