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The China Angle: 'IPO Gift Giving'

The China Angle: 'IPO Gift Giving'

November 20, 2007 | By Shang Koo

November 20, 2007 | By Shang Koo
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In the latest China Angle column, Pacific Epoch's Shang Koo looks at the latest in Chinese industry news, including real gold for MMO players, The9 partnering with EA for FIFA Online 2, and NCsoft's rocky history that's led it to strike new ties with Shanda.

Virtual Stocks, Real Gold

China's newly listed online game company Giant Interactive announced its third quarter 2007 earnings on Monday. The company had US$38.7 million net profit on US$54.1 in revenues. Long rumored to be the most profitable online game company in China, Giant was true to its reputation and recorded an amazing average revenue per paying user (ARPU) of US$40.69 for its free to play MMORPG Zhengtu Online (pictured). The company was the latest Chinese online game company to list but instantly became the largest by market cap, currently at US$3 billion.

To celebrate the company's listing, every Giant employee received a commemorative gold coin weighing 9.39 grams. The company has around 800 employees. Gamers also benefited from the company's listing. Giant is giving away virtual stock certificates in November and December for gamers in newly launched server realms for its two games. The certificates can be exchanged for gold according to Giant's stock price on NYSE. Unfortunately for the gamers, Giant's stock has already fallen below its issue price of US$15.50.

FIFA Fever

China's World of Warcraft operator The9 Limited announced last week that it will operate EA's FIFA Online 2 in China. They received the license to operate FIFA Online earlier this year, when EA purchased a 15 percent stake in The9. Although FIFA Online has yet to be launched in China, The9 plans to launch FIFA Online 2 by the end of 2007.

The9's Mark Cuban-esque CEO Zhu Jun is infamous among Chinese gamers for his love of soccer. Zhu owns the top professional soccer team in Shanghai and purchased a Brazilian soccer team in 2005. Earlier this year, the 40 year old Zhu even took the field personally against Steven Gerrard when his soccer team Shenhua played an exhibition game against Liverpool. According to rumors, Zhu's soccer team Shenhua may also appear in the Chinese version of FIFA Online 2 when it is launched.

If At First You Don't Succeed, Find A Different Partner

Korea's NCsoft and Chinese online game operator Shanda announced on November 6th that the two companies have formed a strategic alliance. Shanda agreed to invest in NCsoft's China subsidiary NCsoft China and license NCsoft's upcoming MMORPG AION. The game may be launched as early as second half of 2008.

NCsoft first entered China in 2003 and formed a joint venture with China's largest portal Sina. Sina was the largest player in China's Internet space at the time and was anxious to branch out into online games. The joint venture brought Lineage and Lineage II to China, but both games were too complicated and technologically demanding to attract a large user base. What little traction Lineage II gained in 2005 quickly faded away when World of Warcraft launched a few months later. Sina exited the joint venture in 2006.

The two failures of Lineage and Lineage II signaled an industry shift from licensed Korean games to Chinese domestically developed MMORPGs. With AION and its new partnership with Shanda, NCsoft has a chance to reverse the trend. However, NCsoft faces many of the same problems with AION as it had with Lineage II in China.

Like Lineage II, AION will be the most technologically demanding game when it launches in China. Also, despite inroads made by World of Warcraft, AION will have an uphill battle against a user base that prefers 2D games. AION does have hype on its side, but then again, so did Lineage II.


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