Tradition takes a back seat as gaming goes mobile
By Zhu Shenshen |
March 27, 2013, Wednesday
|
Print Edition
Print Edition
CHINESE online game firms, including Tencent Inc, Shanda Games and Giant Inc, posted slow or negative growth in fourth-quarter profits and revenue, ending a heyday of rapid gains.
It seems that traditional online games have been gradually losing their charm for millions of players in China, where online game industry revenue was surging at least 50 percent annually for years.
The game industry used to be one of the most profitable in the country's dot-com sector.
The increase in mobile games has attracted users to play on their handsets rather than on computer screens. At the same time, fierce competition has eroded profit margins.
"The traditional online game is now a heavy and slow-moving train," said Xue Yongfeng, an analyst at Analysys International, a Beijing-based information technology-consulting firm. "It's still big, but it's challenged by the lighter, more flexible mobile game business."
Tencent, which drew half its income from the game business, said its fourth-quarter net profit increased 37 percent from a year earlier to 3.5 billion yuan (US$555 million). Its net profit margin was 28 percent, down from 32 percent a year ago.
Operating profit fell 21 percent to 3.7 billion yuan.
Tencent said it was diversifying its business model to embrace mobile games and advertising, based on its relatively new WeChat, an instant messaging and picture-sharing tool that has attracted 300 million users in China.
Tencent's total revenue is expected to be 56.1 billion yuan this year, reflecting "lower game sales," according to a scaled-back estimate from investment bank Morgan Stanley.
Shanghai-based Shanda Games posted a 20 percent decline in quarterly revenue to 1.08 billion yuan.
According to its fiscal report, sales from the company's top three games - Mir II, Dragon Nest, and Woool - were down about 25 percent.
Tencent and Shanda are not alone in the industry slowdown.
In 2012, China's online game revenue rose 26 percent to 56.4 billion yuan, only half the growth rate of 2010.
Meanwhile, mobile game industry revenue surged 37.1 percent last year to 5.43 billion yuan, according to Analysys.
Mobile games all the rage
The number of competitive online game firms has been on the increase in recent years, with relatively new entrants such as Changyou from Sohu.
"Intensifying competition on multiple fronts is a risk for Tencent and Shanda," said Timothy Chan, an analyst with Morgan Stanley.
Beijing-based Perfect World posted a net profit of 540 million yuan for 2012, a 45.1 percent decline from a year earlier. Revenue fell 7.1 percent to 2.7 billion yuan.
Mobile games have become all the rage in China, thanks to the popularity of smartphones.
Targeted game groups have expanded from "hardcore" young male players to all people, including girls and parents, industry insiders said.
Besides global titles Angry Birds and Temple Run, domestic developers have published popular games for phones, such as Find Something (Zhaonimei), Fishing Joy and I'm MT.
I'm MT is the latest example of how new mobile games can grow and challenge the more traditional online game business.
The game was developed with factors and plots taken from World of WarCraft, the most popular massive multiplayer online role playing game in history.
Many World of WarCraft fans have moved to the new mobile game from its originator, still operated by NetEase.com in China.
I'm MT allows them to play anytime, anywhere with their phones. Some users are willing to pay for devices and items in the game.
Online game giants are looking for the ways to expand into the mobile Internet sector, to revitalize growth or at least survive and retain market share.
Shanda has acquired mobile game developers and research for its own for mobile games, the company said.
Shanda Games now owns a diversified online game portfolio, with 23 multiplayer online role playing games, eight casual games, two web games and five mobile games.
Its games are popular in South Korea, which helped lifted overseas income by 60 percent in the fourth quarter.
Ding Lei, NetEase's founder and chief executive, also said recently that his company would be focusing more on mobile games.
For Tencent, the potential to develop in the mobile sector will largely rest on its 300 million WeChat users.
It seems that traditional online games have been gradually losing their charm for millions of players in China, where online game industry revenue was surging at least 50 percent annually for years.
The game industry used to be one of the most profitable in the country's dot-com sector.
The increase in mobile games has attracted users to play on their handsets rather than on computer screens. At the same time, fierce competition has eroded profit margins.
"The traditional online game is now a heavy and slow-moving train," said Xue Yongfeng, an analyst at Analysys International, a Beijing-based information technology-consulting firm. "It's still big, but it's challenged by the lighter, more flexible mobile game business."
Tencent, which drew half its income from the game business, said its fourth-quarter net profit increased 37 percent from a year earlier to 3.5 billion yuan (US$555 million). Its net profit margin was 28 percent, down from 32 percent a year ago.
Operating profit fell 21 percent to 3.7 billion yuan.
Tencent said it was diversifying its business model to embrace mobile games and advertising, based on its relatively new WeChat, an instant messaging and picture-sharing tool that has attracted 300 million users in China.
Tencent's total revenue is expected to be 56.1 billion yuan this year, reflecting "lower game sales," according to a scaled-back estimate from investment bank Morgan Stanley.
Shanghai-based Shanda Games posted a 20 percent decline in quarterly revenue to 1.08 billion yuan.
According to its fiscal report, sales from the company's top three games - Mir II, Dragon Nest, and Woool - were down about 25 percent.
Tencent and Shanda are not alone in the industry slowdown.
In 2012, China's online game revenue rose 26 percent to 56.4 billion yuan, only half the growth rate of 2010.
Meanwhile, mobile game industry revenue surged 37.1 percent last year to 5.43 billion yuan, according to Analysys.
Mobile games all the rage
The number of competitive online game firms has been on the increase in recent years, with relatively new entrants such as Changyou from Sohu.
"Intensifying competition on multiple fronts is a risk for Tencent and Shanda," said Timothy Chan, an analyst with Morgan Stanley.
Beijing-based Perfect World posted a net profit of 540 million yuan for 2012, a 45.1 percent decline from a year earlier. Revenue fell 7.1 percent to 2.7 billion yuan.
Mobile games have become all the rage in China, thanks to the popularity of smartphones.
Targeted game groups have expanded from "hardcore" young male players to all people, including girls and parents, industry insiders said.
Besides global titles Angry Birds and Temple Run, domestic developers have published popular games for phones, such as Find Something (Zhaonimei), Fishing Joy and I'm MT.
I'm MT is the latest example of how new mobile games can grow and challenge the more traditional online game business.
The game was developed with factors and plots taken from World of WarCraft, the most popular massive multiplayer online role playing game in history.
Many World of WarCraft fans have moved to the new mobile game from its originator, still operated by NetEase.com in China.
I'm MT allows them to play anytime, anywhere with their phones. Some users are willing to pay for devices and items in the game.
Online game giants are looking for the ways to expand into the mobile Internet sector, to revitalize growth or at least survive and retain market share.
Shanda has acquired mobile game developers and research for its own for mobile games, the company said.
Shanda Games now owns a diversified online game portfolio, with 23 multiplayer online role playing games, eight casual games, two web games and five mobile games.
Its games are popular in South Korea, which helped lifted overseas income by 60 percent in the fourth quarter.
Ding Lei, NetEase's founder and chief executive, also said recently that his company would be focusing more on mobile games.
For Tencent, the potential to develop in the mobile sector will largely rest on its 300 million WeChat users.
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