China Remains Gaming Target

Posted by jgaudiosi :: Emerging Business Models

ChinaAccording to research firm Niko Partners, the Chinese videogame market took in $683 million last year. A new report forecasts double-digit compound annual videogame growth of 24 percent to reach $2.1 billion by 2010. Because of rampant piracy, the game industry in China has focused on massively multiplayer online games. A whopping 84 percent of the Chinese game market is comprised of online games, which encompass both casual and hardcore games.

The Chinese market is enticing to game publishers, which have gradually started to focus on the country's huge gaming population. Game companies like Electronic Arts and Ubisoft have game studios in the country. There's a growing number of universities that are feeding fresh programmers into the pipeline to support new game developers. But what's most interesting about China are the 234 million people between the ages of 14 and 24 that game publishers can tap into.

According to Niko’s fourth annual report on the market, 29 percent of China’s 27 million gamers played games more than 60 hours per month, which helped contribute to a 23.6 percent growth rate in China’s videogame market from 2004 to 2005. A growing market for these online gamers is premium casual games, which are forecast to grow from 20 percent in 2005 to 40 percent of all online revenue by 2010--matching massively multiplayer online gaming revenue.

MMOGs and casual online games bypass hardware and software, which are currently sold for practically nothing on the black and gray markets. With online games, the only fees involved are via credit card for time played. Game publishers have found new revenue streams through the sales of in-game content. Most MMOGs are given away for free, and then subscriptions are charged to play the games online. Gamers can delve further into these worlds by purchasing new in-game content with real money. Twenty-nine percent of Chinese gamers are classified as hardcore (up from 20 percent last year). These players log an average of 60 hours of online gaming per month.

Gamers access the online gaming universe an average of four hours per day through the estimated 20 million PCs in China’s 265,000 officially licensed and unlicensed Internet cafés, almost all of which have broadband access and regularly maintained PCs. Gaming growth is also the result of more broadband access in Chinese homes. More people are playing PC games in homes.

Within the next two years, Sony, Nintendo and Microsoft are expected to launch next generation consoles in China. These consoles, which have always-on connections, will allow game publishers the chance to follow the PC model for casual and hardcore gaming. There are certainly plenty of challenges with the Chinese market, including the restrictive nature of the government and the rampant piracy issues, but the massive audience that awaits is too enticing for many game companies to pass up.

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