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In-Depth: China's Burgeoning Game Industry, Audiences

In-Depth: China's Burgeoning Game Industry, Audiences Exclusive

September 11, 2009 | By Lisa Hanson

September 11, 2009 | By Lisa Hanson
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[In this Gamasutra-exclusive column, Niko Partners' Lisa Hanson offers an expert analysis of the rapid growth in the Chinese game market, following the firm's in-depth report on the region's developers, audience and industry.]

There's no doubt that China is one of the fastest-growing markets for video games (primarily online games) worldwide. With more than 64.9 million online gamers predicted by the end of 2009, there are a lot of questions about Chinese gamers' behavior and preferences, including how much time do they spend and where do they play games, what hardware do they use, and so on.

As a natural extension of the vast gamer base, China has also cultivated a talented game development force that has been honing its skills for the past few years, achieving a strong reputation globally for game development beyond just the art outsourcing that laid the groundwork for Chinese game development.

While the West has been playing console games for decades, and MMOs since the late 90's, Chinese business models for games are different than we find here in the West. Subscriptions, as we know them for games like World of Warcraft, EverQuest, Age of Conan and others, are available for some AAA titles, but most games utilize the free-to-play (F2P) or item-based sales model instead.

Chinese gamers prefer F2P online games to subscription games and they want to play games on high-end PC hardware. In our most recent report, the 2009 Chinese Gamers Study, we actually had the opportunity to speak to more than 1,850 gamers and get their opinions about the games they play, why they play them, and what works for them as consumers. Nearly 50 percent of the 1,850 gamers surveyed said that they have been gamers for 3-5 years, and 20 percent are hardcore gamers, playing more than 22 hours per week.

Gamers have become choosier about the games they play, and the economics of the Chinese market have finally started to shift from supply-driven (pushed from the publishers) to demand-driven (pulled by the gamers), which is a normal course for a growth market. Chinese development studios have "box seats" to listen to the behavior and demands of Chinese gamers as they produce games for their domestic market, as well as games for export.

Chinese developers have traditionally been focused on one aspect of the supply chain for games. An art outsourcer would just handle art, and coders would program, but rarely would a complete Western game be created in China until just a few years ago.

According to our Chinese Game Development Studios Compensation & Benefits Analysis, domestic development of games is a segment of the market that is growing in demand, but there are still fewer experienced developers than needed by domestic studios.

We found that salaries are fairly competitive among studios, but there are key ways to recruit and retain talent in a market where the supply of talent lags demand - and one of those ways is to be sure to have a full development pipeline of interesting projects to work on.

Developers tend to have 2-4 years of professional experience on average, and while studios have been in business for several years, some even 13 years or more, the outsourcing studios are just starting to really consolidate, resulting in fewer but bigger and broader studios that can handle all aspects of game production, and online operators have been expanding their in-house development capacity.

To address the greater market in China, online game operators such as Tencent, Shanda, and Perfect World are not only publishers of licensed games but also developers of games for China and overseas. Each of these operators, plus many of the others, has a catalog of online games to appeal to different users, with monetization models ranging from micro-transactions to time cards, to advergaming. This gives gamers more choice in what and how they play.

Chinese gamers typically play one MMO at a time plus multiple casual games. While the leading cause of starting or leaving a game used to be that one's friends were or were not playing it. Because of the strong social nature of Chinese gaming, today's savvier gamers state that the main reason to play a certain game title is that it is the best one in its genre, and the main reason to abandon a game title is that they want to try other games.

These gamers are demanding higher quality, and while Chinese studios produce high quality titles much of the time, there is still room for growth to reach world class development studio status.

In China gaming remains the least expensive social activity, and the hotbed of social gaming is China's 170,000 Internet cafes. However this is less true in the "smaller" cities than it is in the major metropolises ("smaller" in quotes because there are 90 Chinese cities with populations greater than 1 million, whereas there are only 10 in the United States).

Gamers in the major cities flock to cafes for social gaming with their friends. But with 84 percent of PC ownership among the 1,850 gamers surveyed online for Niko's report, home usage has finally surpassed Internet cafe usage, though some online operators report that roughly 40-50 percent of their revenue comes through the Internet cafe channel.

There is lower usage in the smaller cities, probably because the cafes are not as swank and high tech as they are in places such as Shanghai and Beijing. Gamers would rather play at home where they enjoy their environment than go to cafes where the hardware and environment may not meet with their personal standards.

This will change as Internet cafes improve in those smaller cities, though, and that has started to happen now that the ban that had been put on new Internet cafe licenses has essentially been softened for new cafes to open in cities further afield at the discretion of the provincial government. As savvier gamers demand more from domestic development and game operators, they are also demanding more from their PC hardware and the environments within the Internet cafes.

There's a lot to learn about China when it comes to games, and it's impossible to put it all in a single article, but I invite anyone interested in finding out more to contact us. We've done a lot of research on the market over the past 7 years!


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