GAMES firms in Shanghai, which comprise about 30 percent of national industry revenue, are diversifying and, in the process, transforming the traditional online games business after slower growth rate in recent years.

Companies are expanding into the booming mobile games sector, offering gamess on new platforms such as games consoles and TV, and seeking investment from professional funds in capital markets.

“It’s time for us to redesign our business,” said Ji Xuefeng, president of Giant Interactive, which announced last week plans to launch 10 mobile gamess this year. “We are fully prepared to move into research, capital and other resources.”

Giant is the latest local firm to adapt its business model to changing times, following in the footsteps of rivals like Shanda and The9, and newer industry players such as Microsoft’s local partner BesTV on Xbox One.

Local firms have advantages because Shanghai is a leader in China’s games industry and because the city boasts new opportunities provided by its new free trade zone, which allows and encourages business innovation, industry insiders said.

In 2013, Shanghai’s games industry revenue jumped a third to 25.2 billion yuan (US$4.1 billion). The industry, which has created 60,000 jobs in the city, generated more revenue than the combined sales of books, magazines and newspapers in the city, according to the Shanghai Press and Publication Copyright Administration.

From B1

More than 60 percent of gamess available in China are approved in Shanghai, which is the only city aside from Beijing capable of processing games publication applications.

The administration has invested in new offices and equipment to help games firms obtain approvals as soon as possible, said Zhu Junbo, vice chairman of the administration. Processing time has been whittled down to as few as 10 working days. Such timely approval is considered critical if firms are to recoup development costs and enhance their competitive edge in the marketplace.

China’s games industry revenue grew by about a third last year to 89.2 billion yuan, but the pace has slowed from over 50 percent in prior years, according to iResearch, a Shanghai-based games firm.

In March, New York-listed Giant Interactive announced it would be taken private by its parent in a US$3 billion plan, backed by a financial consortium. The transaction is expected to close in the second half of this year.

Giant is the latest games firm to penetrate the booming mobile gamess business, following giants like Shanda and Perfect World. It has formed a 300-strong team to work on mobile games development and plans to invest “several hundred million” yuan annually on mobile gamess.

It is cooperating with top mobile distributors like Qihoo 360.

Giant is best-known for ZT Online, a massively multiplayer role-playing games with an ancient Chinese martial arts theme.

The Chinese government’s strict regulations and the mature state of the PC market have eroded profit margins for Chinese games firms like Giant and Shanda.

In January, Shanda said it was going private in a US$1.9 billion deal. It has developed mobile gamess, generating average quarterly income of more than 100 million yuan from that business.

China’s mobile games market revenue will hit 20 billion yuan in 2014, almost double last year’s level, thanks to the popularity of smart phones in China, analysts said.

Besides mobile expansion, local firms are expanding into TV and console platforms.

Microsoft’s Xbox One will debut on the Chinese mainland in September — the first games console to be officially sold in the domestic market, where console sales have been banned for more than a decade.

Microsoft and BesTV, which formed a joint venture called E-Home Entertainment Development Co in Shanghai’s pilot free trade zone, will be in charge of Xbox One manufacturing and sales in the mainland.

Games market

The Xbox One’s offering of gamess, entertainment, education and fitness content will help the partners penetrate the home entertainment system market to meet surging demand, with nearly a half billion people playing gamess, more than the entire population of North America.

“The launch of Xbox One here will bring us a lot of new games-playing groups besides core players of computer gamess,” said Zhang Dazhong, chairman of the joint venture.

BesTV, a new media subsidiary of the Shanghai Media Group, will develop video gamess and provide global distribution support for locally produced Chinese video gamess, said Zhang, who is also vice president of the group.

Shanghai-based The9 Ltd has established a joint venture with ZTE Corp, China’s biggest public telecommunications firm, in the home entertainment set-top box business.

ZTE9 Ltd, a joint venture between the two sides, aims to sell 3 million set-top boxes with high-definition gamess and video functions.

“It’s a cross-industry product to feature the latest technologies in hardware, software and service,” Zhu Jun, The9’s founder and chairman, said at a event in March.

The trend in the industry is to woo users to play gamess on TV with new set-top boxes.

In March, Shenzhen-listed Wasu and Hangzhou-based Bianfeng launched the Bianfeng box, while telecommunications equipment giant Huawei Technologies earlier unveiled Tron games boxes with gamess developed by Beijing-based Perfect World.

Chen Tianqiao, chairman and founder of Shanda, has long talked of his dream of establishing an “online China’s Disney” business.

Shanda has invested in cultural and entertainment businesses, along with developing games businesses such as online literature, mobile Internet, and film and music publishing, according to Chen.

Shanghai-based CMC Capital Partners, China’s first specific media-and-entertainment fund, has just announced the conclusion of its first US dollar funding deal, valued at US$350 million.

CMC, led by Chairman Li Ruigang, has made investments that include the acquisition of Star China, the creation of Oriental DreamWorks as a joint venture with DreamWorks Animation, and an investment in IMAX targeting the premium film and home theatre business.

Giant, in cooperation with two local property developers, also announced that it will invest 2 billion yuan to build China’s first games-theme town in the style of ancient dynasties. The site will feature Swordsman Society scenes to woo games fans and tourists.