China's online game market is set to grow at least 20 percent
annually in the next four to five years thanks to the increasing
number of players who are spending more on the games.
While the game operators are aggressively marketing their
titles, the game market is becoming less concentrated with more
companies entering the fray, which may result in an industry
consolidation within three years, according to latest industry
The online game market in China generated sales of 12.8 billion
yuan (US$1.75 billion) last year, an increase of 67 percent over
2006, according to iResearch, a Shanghai-based IT industry
"The major drive behind the robust growth is the rapidly
increasing web population, while game operators are exploring more
ways to dig deeper into players' wallets," said iResearch in a
The number of China's netizens grew 53 percent last year from
2006 to hit 210 million by December, which means the country is
close to overtaking the United States to become the world's No. 1
by web population size, according to China Internet Network
Information Center (CNNIC).
Nearly 60 percent of the web users (more than 120 million) have
played at least one title in the past year, with an average of 7.3
hours spent on the online games every week. Twenty-one percent of
them even played more than 10 hours a week, according to CNNIC.
At the same time, game companies are trying to attract more
players by offering free-to-play games that are gaining in
It allows the operators to acquire players quickly, who then
have to pay for the equipment to advance in the game.
One successful example is Giant Interactive Group Inc, operator
of ZT Online which is a game with settings in ancient China and a
focus on mythology.
According to International Data Corp, the game was voted the
most popular online game in China in 2006, helping Giant
Interactive to raise US$887 million in an initial public offering
late last year.
Its success also lured other game companies, such as the
country's top two online game operators, Shanda Interactive
Entertainment Ltd and NetEase.com, to offer their free-to-play
titles, or change the model of their previously pay-to-play
Giant Interactive ranked No. 3 in China's online game market
last year, trailing NetEase's 18.7 percent, according to iResearch.
Shanda led with 24 percent of the market.
Giant's rise, together with several other game companies that
went public in the past year, has intensified competition and
diluted the market.
The combined share of the top three operators last year dropped
by five percentage points last year to 58 percent, according to
Beijing-based Analysys International.
"More and more game companies are entering the competition on
their self-developed titles, usually one or two well received
ones," said Li Jiayan, an analyst with Analysys, adding the result
will be more mergers and acquisitions in the industry.
Shanda has already launched a plan called Fengyun Project, for
which it has budgeted two billion yuan to acquire the newly emerged
domestic online games to add to its game pipelines. The
requirements: Any game with more than 1.5 million players.
Overseas game companies are also looking for ways to set up
their platforms, though current regulations on the Chinese mainland
make it difficult for them to operate a game on their own. Among
them, GigaMedia, a Taiwan-based game operator, has gained control
of Shanghai-based T2CN, while Electronic Arts Inc is still seeking
partners to operate its Pogo China portal after a former local
partner broke up with it.
"It will be difficult for companies ranking after 20 to survive
from this year," said iResearch in its report.
(Shanghai Daily February 1, 2008)