Market Research Report :Online Gaming Market in China 2009

Online Gaming ‐
Online Gaming China
November 2009

Executive Summary

 China’s online gaming market has been identified as the largest online gaming market globally
Market  Estimated worth USD 3 bn in 2008; Expected to grow to USD 10 bn in 2012
 Online gaming user base expected to rise by 15% annually over 2009‐13

Drivers: Growth in broadband subscribers, steady rise in computers purchased, large number of
consumers drawn to online gaming, growing revenues from advertisements, growth in mobile
Drivers & internet users and large demand from the export market
Challenges Challenges: Cumbersome market entry procedure, protectionist approach adopted by the
Challenges: Cumbersome market entry procedure, protectionist approach adopted by the
government, online gaming fraught with cyber criminals, low internet penetration level and
introduction of the anti‐game addiction programme

 Growth in Pre‐paid Gaming Cards
Growth in Pre‐paid Gaming Cards
 Government Clamps Down on Online Games Content
 Focus on R&D
Trends  Branding Taking Priority Among Players in the Market
 Players Compete in the International Market
Players Compete in the International Market
 Operators Non‐compliant with Virtual Currency Regulations

 Industry is highly fragmented with heightened competition amongst players in this space
Competition
C titi  Tencent Holdings Ltd is the largest player in the market
Tencent Holdings Ltd. is the largest player in the market
 Export market is dominated by Perfect World Co. Ltd.

ONLINE GAMING – CHINA.PPT 2

•Market Overview
•Drivers & Challenges
Drivers & Challenges
•Market Characteristics
•Competition
•Key Developments


Global gaming industry has been growing steadily with
major contribution for the Asia Pacific region Global

Overview Market Size and Growth (Global)
• Asia‐Pacific has been pegged as the fastest growing USD bn
region till 2013 80
+7% 74
68
 Major markets include: China, Korea and Japan 59 63
60 51 55
• Piracy has been driving the online gaming industry as
game publishers are focusing on the online market 40
due to the transparency in online transactions 20
• In game advertising has also grown in this region and
In‐game advertising has also grown in this region and 0
is forecasted to contribute USD 365 mn by 2013 from 2008 2009e 2010e 2011e 2012e 2013e
USD 185 mn in 2008 Online games expected to grow at 10.6%

Gaming Platforms Market Size and Growth (Asia‐Pacific)
USD bn
Platforms +9% 25
25 22
20
20 17 19
16
15
10
Console Online Mobile PC
5
0
2008 2009 2010e 2011e 2012e 2013e
International market is dominated by games played on consoles Online and wireless games will constitute 60% of the market


China’s online gaming market is expected to grow with the
increase in paid user base China

Overview Market Size and Growth
• China’s online gaming market has been identified as USD bn
the largest online gaming market globally 15
• The industry is estimated to grow at 35% annually up
+35% 10.1
to 2012 10
7.5
• The market is fragmented with a large number of 5.6
4.5
small players 5 3.0
•GGrowth in internet access and infrastructure will
hi i di f ill
0
drive the market
2008 2009e 2010e 2011e 2012e

Growth in Online Games Developed China Online Gamer Base
+14% mn
Paid Players
300 286 150
250 Free Users
+15% 105
200 100
60 62%
Growing share
100 50 58% of paid users
42% 38%
0 0
2007 2008 2009 2013e


Players across the market have adopted different business
models based on their capabilities
Business Models

• Characterized by healthy margins as there are no upfront licensing
y y g p g
fees
•Companies retain bargaining powers with telecom operates, ISP’s
Develop and Distribute
and internet café operators
•Makes it easier for developer to control and upgrade the content as
p pg
it has complete control of intellectual property

•Gaming carriers who are unable to develop their own games
Gaming carriers who are unable to develop their own games
Licensing primarily focus on obtaining the license for operating online game
titles

•This allows players to capitalize on the high margins that can be
reaped from an extremely successful game
Develop and License
•These are large establishments as high costs are entailed in
managing a development and production wing


Online gaming industry offers a wide spectrum of games
catering to different segments in the market
Types of Games

•Games where a large number of players play the game simultaneously
g p y p y g y
Online Multiplayer •These games are open‐ended i.e. play continues even when a particular
gamer logs out during a gaming session

•Available generally for free with revenues being generated primarily
l bl ll f f h b d l
Casual
through advertising

•Developed for corporate hiring and training, educational development and
•Developed for corporate hiring and training educational development and
Serious/educational
understanding workflow and customer engagement in enterprises

Networked
N k d •Commercial games played on PC’s or consoles wholly or partly online
C i l l d PC’ l h ll l li

•Designed to promote a particular product or create awareness about a
Advergaming
company


•Market Overview
•Competition
•Key Developments



Challenges

Drivers
Di Cumbersome market entry procedure
C b k t t d

Growth in broadband subscribers Protectionist approach adopted by the
government

Steady rise in computers purchased
S d i i h d Online gaming fraught with cyber
Online gaming fraught with cyber
criminals
Large number of consumers drawn to
online gaming Low internet penetration level

Growing revenues from
Growing revenues from Introduction of the anti‐game
I d i f h i
advertisements addiction program

Growth in mobile internet users

Large demand from the export market


Rising broadband penetration will drive online gaming in
general and massive multiplayer online games
Growth in broadband subscribers Impact
• China boasts of the world’s largest internet user base and it has been constantly growing over
the years with strong growth forecasted in the future
• Growing penetration of broadband will allow for high‐speed data transfer leading to the
development of the online gaming market
• Players can expect larger revenues as they can create high end online games which will be well
supported with high speed broadband and fetch them premium prices

Broadband User Base Expected Growth in Internet Users

mn Broadband mn
Others +9%
300 400 375
253 347
250 322
210 295
300 268
200
162
150 137 85% 200
123
78%
100 66% 75%
63% 100
50
37% 34% 25% 22% 15%
0 0
Jun 06 Dec 06 Jun 07 Dec 07 Jun 08 Dec 08 Jun 09e Dec 09e Jun 10e Dec 10e


Increasing penetration of PC’s will lead to rising demand for
online gaming
Steady rise in computers purchased Impact
• China is expected to become the largest PC market in the world by 2015
• It has been estimated that the country will continue to see a rise in computer sales
• Players are looking to expand operations to the rural market as well which will lead to major
price competition benefiting consumers
 Government is assisting growth in the rural areas as it introduced a subsidy of 13% on the purchase of a PC
PC Sales Volume Laptop Sales Volume

+9%
mn mn +19%
39.5 40.6 47.2 Fastest 15.8
50 20 13.3
growing
segment
0 0
2008 2009 2010 2008 2009
• A major shift has been seen towards laptops in the PC market which has been accounting for a
larger fraction of total revenues in China’s PC market
Sales Revenue

100% 7.5% 7.7% 100% Server
34.0% 39.4%
50% Laptop
58.5% 52.9% Desktop
0%
2007 2008


Rising average internet access time and high internet usage
of online gaming will attract players
Large number of consumers drawn to online gaming Impact
• Large cross‐section of internet consumers have been using the internet to specifically play
online games which is on the rise due to growing number of hours spent online by users
• Furthermore, consumers seek cheaper alternatives to the traditional entertainment avenues
 Online games at USD 3 – 6 cents an hour is a much cheaper option than a movie ticket
Internet Usage by Category Average Access Time
0 10 20 30 40 50 60 70 80 90
% h
hours/week
/ k
Online Music 87 +11%
Instant Messaging 20 18.6 19.0
81
Online Video 77 16.5
Online News 74 15 14.0
12.3
Search Engine
Search Engine 72
Internet Games 59 10
E‐mail 57
E‐government 25 5
Update Blog/
Personal Spaces
p 24
Online Shopping
O li Sh i 22
0
Online banking 19 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08
Online Brokerage 18
Online Education 17
Online Payment 16
Online Job Search 10
NOTE: Based on a survey by CNNIC


Rising phenomenon of in‐game advertising will allow
operators to generate larger revenues
Growing revenues from advertisements Impact
• Casual online games segment operating on a free‐to‐play model has seen strong growth due to
the existence of many small players who are unable to develop multiplayer games
• Developers are generating revenues through online advertisements which has been growing
over the time
Online Advertising Market

USD mn
USD mn
2,877
3,000 +42%
2,104
2,000 1,646
1,104
1,000 723
345 479
0
2004 2005 2006 2007 2008 2009e 2010e

• Major brands have partnered with game publishers towards incorporating their products in the
online game itself as a branding exercise to target a specific market segment accessing the
online game itself as a branding exercise to target a specific market segment accessing the
particular game
• Coca Cola partnered with Shanghai‐based Shanda Entertainment to incorporate its product in
their game Aion


Rising mobile subscribers and the growth in mobile internet
users will drive the market in the future
Growth in mobile internet users Impact
• Growth in mobile subscribers coupled with the large scale user base accessing the internet
using mobile phones is expected to drive demand for online games
• The issuing of 3G licenses that began in January, 2009 will further boost this industry
• The mobile gaming sector, including preloaded as well as online games, is valued at USD 263 mn
in 2009 and is estimated to grow at 60% to reach USD 1,075 mn by 2012
Growth in Mobile Subscribers Growth in Mobile Internet Users
mn mn
+14%
1,500 200 +37% 155
962 1,039
1,000 763 870 117
547 654 100 73
500 44 50
0 0
2007 2008 2009f 2010f 2011f 2012f Jun 07 Dec 07 Jun 08 Dec 08 Jun 09
Usage of Mobile Applications
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75
%
Mobile Chat 71.5
Mobile Search 26.2
Online Music 25.8
Online Gaming 14.7 Strong opportunity for growth in the
Mobile Mail 9.8
Mobile Community
Mobile Community 9.6
96 online mobile gaming market expected
Mobile Blog 8.3 to grow further with the influx of 3G
Mobile TV 8.0


Demand from the export market will lead to large scale
expansion and technological development
Large demand from the export market Impact
• In 2008, the total value of China’s online gaming exports amounted to USD 72 mn
• The export market has been growing significantly
• Over 30 Chinese online games were exported to the overseas markets in 2008
• Some of the major regions includes North America, Europe, Japan and Southeast Asia
• This large demand is expected to lead to the expansion of companies operating in this space
and will act as a major incentive for companies to foray into the market

Online Gaming Export Market Major Export Markets Segmentation

USD mn 6 %
6.1% Southeast Asia
Southeast Asia
+30%
80 72 14.4% Europe and
60 56 North America
51.2% Japan &
40 South Korea
28.3%
20 Others

0
2007 2008


Complicated market entry mechanism will deter new
players from entering the market
Cumbersome market entry procedure Impact
• In order to operate in the online gaming space, players must adhere to a complicated
application procedure involving multiple government agencies

Major Government Authorities and the Licenses required to Operate

General
Ministry of Commerce Ministry of Industry
Ministry of Culture
Ministry of Culture Administration of
Administration of
and the State Bureau of
d h S B f and Information
dI f i
(MOC) Press and
Industry and Commerce Technology
Publications (GAPP)

Commercial
Commercial Internet Content
Internet Content Content Approval
Content Approval Internet Publication
Internet Publication
approval Provider license License License

• It has been observed that there is a large degree of overlap among these licenses leading to
inefficiencies in the system
• Furthermore, there is a lack of transparency in the regulatory System
• Major instability in the online gaming market has been induced by bureaucratic conflict
between the two major regulatory bodies in this space namely the GAPP and MOC
p y g p j
• This has deterred players from entering the market and is expected to act as a major
impediment to a market which shows promising growth opportunities


Protectionist approach adopted by the government
and the rise in cyber crimes will impede growth
Protectionist approach adopted by the government Impact
• Government agencies regulating the online gaming space are curbing the entry of new foreign
players into the domestic market
• One of the key Chinese government agencies in this space, the General Administration of Press
and Publications (GAPP), forwarded on October 10, 2009 that foreign investment is prohibited
in the domestic gaming sector
• Foreign investors have been completely prohibited from operating online games in China via
any form including a wholly owned foreign enterprise, joint‐venture, commercial cooperation,
any form including a wholly owned foreign enterprise joint venture commercial cooperation
or technical support
• This is expected to have a detrimental effect on the market

Online gaming fraught with cyber criminals Impact
• China has been the worst affected by attacks from cyber criminals
• The online gaming space has led to large scale malware attacks affecting the end‐users system
• China endures 45% of global malware infections
• More than 90% of all rojans targeting online games are written in China
More than 90% of all rojans targeting online games are written in China
• Three routes to swipe online game passwords used by hackers have been identified
 Social Engineering ‐ Phishing or bogus offers of bonus or tips in exchange for registering onto rogue systems
 Exploiting game server vulnerabilities
 Using malicious programs to obtain passwords
• This has deterred consumers to access the online gaming sites due to security issues


Low levels of internet penetration and the anti‐game
addiction programme is expected to be detrimental
Low internet penetration level Impact
• Internet penetration level in the country has been rising, however, it is much lower than other
major markets and will act as a barrier for the online gaming market
Penetration Rate of Internet Comparison of Internet Penetration
% 0 10 20 30 40 50 60 70 80
30 %
25.5 Korea 76
25 22.6 USA 75
19.1
20 16.0 Japan 77
15 12.3 Brazil 74
9.4 10.5 Russia 27
10
China 26
5
India 7
0
World Average 24
Jun 06 Dec 06 Jun 07 Dec 07 Jun 08 Dec 08 Jun 09
Introduction of the anti‐game addiction programme Impact
•GGAPP introduced the anti‐game‐addiction program towards curbing online addiction
i d d h i ddi i d bi li ddi i
• It has been estimated that the proportion of people under the age of 18 playing online games
has dropped 7% since 2008
• Program requires online game producers to discourage online play for more than 3 hours by
reducing game credits
reducing game credits
• Additionally players are required to register with their real names in order to verify their age


•Market Overview
•Competition
•Key Developments


Market Characteristics

Growth in pre‐paid gaming cards

Government clamps down on online games content

Focus on R&D
Key
Characteristics
`

Branding taking priority among players in the market

Players compete in the international market

Operators non‐compliant with virtual currency regulations


Rise in pre‐paid gaming cards sold through retailers towards
providing easy access to online games
Growth in pre‐paid gaming cards
• The Chinese online gaming market has seen the high growth in the usage of prepaid cards as a
means to access games online Players using it
as a tool for
as a tool for
• These cards are sold through various retail stores and allows teenagers access to online games
branding and
as they are in a position to pay for an enhanced gaming experience
sales
• This further allows small players to compete in the market as they market their product and
generate revenues via tie‐ups with retail stores
•HHowever, players are looking towards transforming the existing physical card distribution
l l ki t d t f i th i ti h i l d di t ib ti
system into an electronic platform, eliminating the theft, fraud and inefficiencies in the existing
model
 Pay88 is the leading reseller of internet game‐time
– It sells online multiplayer game time and prepaid cards in more than 20 cities in China
 Asia Virtual Payment took internet game card distribution into hyperspace
– It has deployed point of sale machines in ~ 1000 cyber cafes in 12 major cities across China
– Operates through transaction servers held in dedicated banking ISP facilities at China Netcom and China Telecom
– The companies payment clearing partner includes China Union Pay and China Pay
• Tapping in to both these (online and offline) prepaid card markets, Perfect World distributes
pp g ( )p p ,
physical and virtual prepaid game card
• This has allowed gamers access a wide range of games where usage is time based vs. paying for
complete access to a particular game


Government’s regulation and the growth in technological
advancements will affect the market
Government clamps down on online games content
• GAPP forwarded that it plans on introducing China Green Online Games Publishing Program in
2010 Content
• It has been seen that companies provide unhealthy and persuasive content in online games for
It has been seen that companies provide unhealthy and persuasive content in online games for regulation will
regulation will
players, especially kids, so as to attract players and generate large profits stabilize the
• This program will be targeted towards curbing illegal release of online games and will lead to market
stricter control on the games' approval
• Inappropriate content in games will be assessed and games not in accordance with the
regulation will be taken offline
• This is expected to rage over a period of 5 years

Focus on research and development
• Players in the market have begun looking at large scale investments on research and
development activities towards creating more original games Technological
advancements a
• Giant Interactive Group Inc. plans on increasing their investment budget on R&D from USD 14.7
priority to
mn. It acquired a fifth independent game research team towards developing new products
compete
• Shanda Interactive Entertainment Ltd. invested USD 73.3 mn to fund ~40 game research teams
in order to create original content
• Emphasis has fallen on R&D in order to contend with growing competition that the market is
facing


Players in the industry have been focusing on branding
activities as well as expansion to international markets
Branding taking priority among players in the market
• Due to the maturity the game development sector has achieved, brand image has become
increasingly important to game developers and producers Branding
activity to retain
activity to retain
• The market has progressed from an import driven sector to a market where players have build
and expand
capacities for self‐developed technologies and games through a systematic game development
customer base
structure
• This has led to large scale integration with game developers communicating amongst
themselves to develop a brand image
themselves to develop a brand image
• Establishments been focusing on the importance of a brand image and the brand loyalty which
accompanies it

Players compete in the international market
• Technological expertise the domestic game developers in the online space have achieved has
allowed them to compete on the international level Domestic majors
• China is expected to account for more than 40% of the global online gaming market by 2011 are expanding
y gy p p g g
• Players such as Changyou and Shanda Games plan on capitalizing on the global market due to horizons
their operational expertise and business model
 Major opportunities are seen in the Western market which is moving from console driven to massive
multiplayer online games as it lacks advanced online game development knowledge


Stricter virtual currency regulations passed by the
government
Operators non‐compliant with virtual currency regulations
• Companies are profiting from the rising levels of virtual currencies
 Small gaming companies make young people play online games to earn credits that the companies then sell
Government
at a profit to overseas customers in Taiwan, South Korea and even the United States know as “gold farming”
t fit t t i T i S th K d th U it d St t k “ ld f i ” plans on curbing
plans on curbing
 eBay and China’s Taobao have online advertisements offering virtual goods for sale using online currencies underground
economy
• Rampant buying and selling of the make‐believe currencies used in online gaming, which
reached alarming levels (USD 1.5 bn), has attracted the governments attention
• On June 26 2009 the Ministry of Culture and the Ministry of Commerce jointly issued new
On June 26, 2009 the Ministry of Culture and the Ministry of Commerce jointly issued new
regulations towards reducing the large scale usage of virtual currency
 Virtual currency may only be used to purchase virtual goods and services from the company that issued the
virtual currency
• Over 90% of China's online game operators are not adhering to these regulations
• Impact of the regulation
 Online game operators are expected to lose from 5‐7% of their annual revenues
 All associations between companies to handle payment issues like billing and customer support for their
games has been rendered illegal
 Trade of virtual currencies has also become against the law
Trade of virtual currencies has also become against the law


•Market Overview
•Competition
•Key Developments


Industry is highly fragmented with heightened competition amongst
players in this space
Overview Market Share
• The market comprises of a large number of players
• Large cross‐section of players have been focusing on Tencent Holdings Ltd.
the casual online games segment as they are unable 20.0%
20 0% Shanda Games Ltd.
to invest and develop the more complex multiplayer 34.6% NetEase.com Inc.
games Perfect World Co. Ltd.
• Players have been focusing on improving their 18.1% Sohu.com Inc.
market position through the introduction of new
market position through the introduction of new 6.9% Others
Oth
games and regularly developing their existing games 8.2% 12.2%
portfolio

Revenue Split Revenues Generated from Export Market
Foreign
Perfect World Co. Ltd.
Companies 7.3%
30% NetDragon Websoft Inc.
1.5%
35.0% Kingsoft Software Corp.
14.6% 4.2%
9you.com
Shanda Games Ltd.
70% 15.5% Giant Interactive Group
Domestic
21.9% Others
Companies


Profiles of Major Players (1/6)

Company Business Description
Changyou.com • Established in 2003; Headquarters in Beijing
• Management Team: Charles Zhang – Chairman; Tao Wang – CEO
• Operates in the massively multiplayer online role‐playing game (MMORPG) space and is a
( )
subsidiary of Sohu.com Inc.
• Partnered with Pay88 for the distribution of online mobile phone games
• Signed a multi‐license deal to use BigWorld Technology as their platform for future games
• Three new games are currently in the pipeline
Financials: 2008 ‐ Revenue – USD 201 mn; Profit – USD 107 mn
Giant Interactive • Established in November 2004; Headquarters in Shanghai
Groupp • Management Team: Yuzhu Shi – Chairman and CEO; Wei Liu – President
• It invested USD 15 mn towards the development of a new 3D game
• It has built a distribution network in order to sell prepaid game cards and game points
required to play its games
 Its outreach, as of March 2008, consisted of over 270 distributors reaching 116,500 retail outlet
• Towards enhancing R&D capabilities, the company allocated a total investment of USD 8.9
mn in the first half of 2009, with plans to launch 8 new games by mid‐2010
• The company plans on investing USD 29 mn on television advertisements towards enhancing
visibility of their products



NetDragon Websoft • Established in 1999; Headquarters in Fuzhou
Inc. • Management Team: Dejian Liu – Chairman; Tao Wang – CEO
• It is the largest Chinese online game operator in the American market
• Expanding international operations by giving exclusive licensing of its flagship game
"Eudemons Online" to Nival Network in Russia
• In October 2007, invested USD 5 mn in research and development activities
NetEase.com Inc. • Established in May 1997; Headquarters in Beijing
• Management Team: William Ding – CEO; Zhonghui Zhan – COO
• It operates a leading interactive online and wireless community in China and is a major
provider of Chinese language content and services through its online games, wireless value‐
added services and internet portal businesses
• It develops and licenses online games which are targeted at the Chinese market
• In 2008, the company spent USD 30 mn on R&D activities for the development of its online
gaming products
• Branding initiative was taken up by the company in November, 2009 with the launch of its
game channel, game.163.com, to extend its business
 The new channel will provide news on games, including product news, player oriented news, and industry
information and will allow the company to market themselves
information and will allow the company to market themselves



Perfect World Co. • Established in March 2004; Headquarters in Beijing
Ltd. • Management Team: Michael Yufeng Chi – Chairman and CEO; Kelvin Wing Kee Lau – CFO
• Plans on leverage its 3D game development capabilities and operating platform to effectively
penetrate the 2D market
• It is currently the market leader in the 3D online gaming space in China
• It invested USD 2.2 mn in a Web game developer and operator Chengdu Ye Net Science and
Technology Development Co. Ltd. towards diversifying its product pipeline
Technology Development Co Ltd towards diversifying its product pipeline
• The company expanded operations by investing USD 3.4 mn in a new company in Taiwan in
order to capitalize on this growing market
• Recent overseas license agreements
 In October 2009 it signed an agreement with VinaGame Software Service Joint Stock Company to license
In October 2009, it signed an agreement with VinaGame Software Service Joint Stock Company to license
"Battle of the Immortals" in Vietnam
 Licensed "Zhu Xian" to the Russian Federation and Other Russian Speaking Territories
• Launched various games overseas in Thailand, Taiwan, Hong Kong and Macau
;



Shanda Interactive • Established in 1999; Headquarters in Shanghai
Entertainment Ltd • Management Team: Tianqiao Chen – Chairman and CEO; Qunzhao Tan – President
• As of March 2009, Shanda has accumulated more than 800 mn registered users
• Operates in this space through its subsidiary Shanda Games
• Offers a portfolio of diversified entertainment content including some of the most popular
massively multi‐player online role‐playing games and advanced casual online games
A fA
As of August 31, 2009, it operated 18 multiplayer role playing games and 11 advanced casual games
31 2009 i d 18 li l l l i d 11 d d l
• Introduced the "18 Funds" project where it paid USD 73 mn to fund nearly 40 game research
teams
• Developed a special computer program, called the e‐sale system, which allowed internet café
owners to buy virtual prepaid cards from Shanda and sell them to customers
owners to buy virtual prepaid cards from Shanda and sell them to customers
 All parties are connected electronically through the system and the transactions are made instantly
 This allowed the company to track how many games each Internet café is selling. This helps the company
figure out how popular the game is in each geographical area and distribute physical prepaid cards
accordingly
 This allowed the company to strategically market their games
h ll d h ll k h
• It is planning to raise USD 800 mn in an initial public offering (IPO) in the United States
• It plans on developing 16 role playing games and 8 advanced casual games
• Financials: 2008 ‐ Revenue – USD 523 mn; Profit – USD 183 mn



Tencent Holdings • Established in November, 1998 and has grown into China's largest and most used internet
Ltd. service portal
• Headquarters in Shenzen
Headquarters in Shenzen
• Management Team: Ma Huateng – CEO; Lau Chi Ping Martin – President
• In 2007, it invested ~USD 14.7 mn in setting up the Tencent Research Institute, China's first
Internet research institute focusing on developing core technologies
• Plans on developing three massively multiplayer online games (MMOG) and one advanced
Plans on developing three massively multiplayer online games (MMOG) and one advanced
casual game for 2009 as well as up to six MMOGs for the first half of 2010
• It set up an R&D center in the Chengdu Hi‐tech Developing Zone (CDHT) with USD 80 mn
 The R&D center integrates the Internet company's core divisions responsible for the operation of its
interactive entertainment platform and aims at improving R&D of interactive entertainment products
p p g p
Financials: 2008 ‐ Revenue – USD 1 bn; Profit – USD 410 mn
The9 • Established in May 2000; Headquarters in Shanghai
• Management Team: Jun Zhu – Chairman and CEO; Xiaowei Chen – President
• Primarily focused on operating and developing high quality games
Primarily focused on operating and developing high‐quality games
• It plans on expanding its R&D by approximately twice its existing strength



• Management Team: Wang Zijie – Chairman and CEO
NineYou • Operates through two business models
 A unified account business model allowing it's customers to enjoy the experience of "SAME“ (Single
Account, Multiple E‐contents) and “FEEL" (First Experience, Expense Later) operation mode
• Actively participated in multiple major marketing activities such as sponsoring popular reality
shows and investing in TV series
• Its in house developed MMOG "Super Dancer Online" has been licensed out for operations in
Its in‐house developed MMOG Super Dancer Online has been licensed out for operations in
over 42 overseas territories
• Subscriber base as of February 2009 stood at ~ 390 mn
Webzen
• Established in 2000; Headquarters in Seoul
; q
• Management Team: Chang Keun Kim – CEO
• Its business operations include PC online games, mobile network games, console games and
derived merchandising
p y g g , , , , p ,
• The company caters to global markets including China, Korea, America, Taiwan, Japan,
Philippines and Vietnam


•Market Overview
•Competition
•Key Developments


Key Developments

Date Development
Nov 2009 One of China’s largest blogging community, 51.com plans on entering the online gaming business through
associations with game developers towards changing their position from a loss making to a profitable firm
Oct 2009 Sina after being absent from China's online gaming industry for several years, has returned as a co‐
operator of its local peer Kingsoft Co. Ltd.'s 2D web game. The company with its edging media resources
and numerous customers that its partner lacks, is likely to accrue experience in online game R&D and
operation from the cooperation.
Feb 2009 KRG Soft exported its online game, Yulhyulgangho, USD 10 mn. This move was made after the game was a
major success in the domestic market. The company planned on capitalizing on the global opportunities
in the online gaming market.
Jan 2009 Capcom Co. planned on entering the online gaming business in China making them the latest game
software developer to tap this burgeoning market.
software developer to tap this burgeoning market
Dec 2008 Shanghai Xiaolin Technologies, a game developer, secured USD 1.5 mn in venture capital funding from
Well Well Group.
Nov 2008 Beijing Kylin Technologies Ltd., a China‐based online gaming company, secured USD 15 mn in venture
capital funding from Shenzhen Capital Group Co. Ltd., SBI & TH (Beijing) Venture Capital Management,
lf d f h h l d & ( ) l
and LEV Ventures.
Oct 2008 LineKong Entertainment Technology Co. Ltd. entered the market with the launch of their first game
“Journey to the West."


Thank you for your time
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Market Research Report :Online Gaming Market in China 2009

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