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GameSpot Video Games, PC, Wii, PlayStation 2, GameCube, PSP, DS, GBA, PS2, PS3, Xbox 360, PlayStation 3

Chinese gaming to boom to $2.1b

Research firm Niko says market in world's most populated country will explode by end of decade; cites Internet cafe, broadband proliferation as factors. Q&A inside.
By Tim Surette, GameSpot
Posted Apr 25, 2006 10:27 pm GMT

Call it a tiger, a dragon, a sleeping giant, or any other nickname, the forecast is always the same--China is set to become an economic powerhouse. As online gaming has spread over all of Asia, China, with around 1.3 billion citizens, is a region that many in the industry are keeping a close eye on.

Niko Partners, a research and consultancy firm that focuses on the Chinese gaming market, today released its findings for 2005 as well as predictions for the future--and it looks rich. The report exceeds even that of analysts' predictions from just last year, when DFC Intelligence projected that China's gaming market would be worth $1.7 billion by 2010. Niko predicts that by 2010, China well be home to a $2.1 billion gaming industry.

According to its findings, the market currently stands at $683 million, and will rise 24 percent per year. The proliferation of Internet cafes and broadband Internet connections in homes is cited as a major factor in China's growth, as 84 percent of games played are online-enabled. Casual games will also contribute, Niko says, jumping from 20 percent to 40 percent of online games.

As for how to milk the market, Niko advises companies to cater to the crowd. The firm states that Chinese gamers "enjoy softer graphics and brighter colors," and consider online gaming a social event.

"Not only is it imperative for a foreign videogame company to understand the preferences and demands of Chinese gamers, they must also strive to develop games that fit the restrictive regulations of the Chinese government," said Lisa Cosmas Hanson, managing partner of Niko Partners. "The Chinese market is different than other global markets, and it will take perseverance as well as innovation in business models for foreign companies to succeed there."

The Niko forecast is based on PC, console, handheld, and online games, and was formulated from data collected in 10 different Chinese cities.

GameSpot spoke with Lisa Hanson this afternoon.

GameSpot: You talk about "developing games that fit the restrictive regulations of the Chinese government." What are the hot buttons that the government looks for...gameplay elements that raise red flags?

Lisa Hanson: The government promotes "healthy gaming." Gamers under 18 are prohibited from Internet cafes and from playing violent player-kill games. Games may not include pornography, violence, or terror. There are many content regulations including points that are discouraged, such as violence, and those that are encouraged, such as promotion of Chinese culture, patriotism, and national ethics. Also, highly creative games and those that do not encourage addictive tendencies are favorable. Games that are unlikely to attract more than 10,000 registered users are unfavorable.

GS: Are there lessons to learn from the Chinese success stories (casual game business models) about the potential for casual game development in this market that could hit it big in China?

LH: It is critical to create a game that is fun to play in an Internet cafe as well as alone at home. In casual games the most success comes when a game is appealing across a broad audience, including female gamers and new gamers. The cute-style games attract more gamers than games with player-kill and harsh graphics. The business model that allows gamers the option of paying a fee to play if they want to have premium services, as is the case with Premium Casual games, works well.

GS: Premium casual games...interesting. What are they?

LH: Premium casual games is another term for Advanced casual games, and they are those which generate revenue, as opposed to puzzle and board games. Examples are FreeStyle, Kart Rider, Audition, and O2Jam.

GS: What are the two or three companies to watch in China? In terms of growth (return on investment potential) as well as just plain creativity and novelty when it comes to business models?

LH: NetEase has the most ingenuity and promise among the publicly traded online game operators. Shanda offers innovative business models but they may not pay off for a while, if ever.

GS: What are the most popular games in China now?

LH: The top MMORPGs and Premium Casual games are World of Warcraft, Fantasy Westward Journey, Westward Journey 2.0, Audition, and O2Jam.

GS: As Internet cafes become more popular, are there chances the government will step in to regulate, for example, the number of hours any one gamer can play?

LH: The government has done so already, by initiating the Fatigue System in 2005. It is not related to hours of play at Internet cafes, just hours of play in a row. If a gamer plays for longer than three hours, the level of his character gets cut in half automatically. If he plays for more than five hours, the level gets cut to the lowest possible level in the game. After five hours in a row of zero gameplay, the system resets itself. Not all games are on the system, but the big ones are.

GS: Finally, the packaged goods business in China has always fared badly due to piracy. Has there been any progress made on that front? Is there more, or less, shrink-wrapped product being sold in China today then there was a year ago?

LH: Even the pirated shrink-wrapped market has taken a hit in the past year, particularly due to illegal downloads of games via P2P technology such as Bit Torrent. According to one Chinese government survey, 27 percent of all 111 million Chinese Internet users have used Bit Torrent at least once in the past year. The ratio of gamers who use the technology may be higher than 27 percent. Legitimate sales suffered from both illegal packaged sales and illegal downloads, and tumbled with a double digit decline from 2004 sales.

GS: Thanks, Lisa.

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50 Comments

First to Last Latest
Suffere

KK... now I'm offended. I am a Chinese Canadian and now they are automatically presuming that we like kiddy games with bright colors.

Posted May 1, 2006 4:39 pm GMT
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living_wmd_888

Red China owes its economic growth less to economic reform than it does to American companies who love an abundant labor market that will work for a dollar a day. The Chinese government shows us the rich downtown section of Shanghai, but were are all the workers working on slave wages? China hasn't really changed a bit. On the other hand, can't blame them for being opportunistic - our own captains of industry are subsidizing the Communist Party of China.

Japanese corporations do more for America than American ones do. Toyota and Sony keep on making more jobs for Americans while GM, Ford, and yes, Microsoft scream poverty and move jobs to China, India, and Mexico where they can pay their workers what the US penal system pays prisoners.

Take a look at a PS2 or Gamecube game and see where it's made (USA). Then take a look at where an Xbox game is made (Mexico). What is "buying American?" Providing a job to an American worker, or putting MORE money into Bill Gates' pocket?

Unfortunately, the hardware for all three companies is made in Red China.

Posted Apr 30, 2006 11:41 pm GMT
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Blazer88

What'd Sony do?Make a game where you run down pro-democracy protesters with tanks?I would try to think about something good to say about China,...but I can't.Country looks pretty I guess.

Posted Apr 29, 2006 9:55 am GMT
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UltimatumCHIEF

China is rising it's fact.

Posted Apr 29, 2006 8:11 am GMT
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CDNBellicose

Commies Suck

Posted Apr 28, 2006 1:19 pm GMT
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ffmarco

haha that was really nice said Thanos. It's all a culture matter, the company that will infuse more successfuly into China's culture will be the moost succesful one.

Posted Apr 28, 2006 12:51 pm GMT
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Thanos_of_MW

A7Xfan "Everything about it is still communist."

You are right. That is also the reason why piracy is rampant in China. Intellectual property has always been property of the people there.

Posted Apr 28, 2006 8:29 am GMT
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howin

Go China !
China Rulz !
LOL

Posted Apr 28, 2006 5:05 am GMT
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A7Xfan

huh... Make a good game and have it pirated. It's gotta be hard to make money, and favoring games that promote China's culture means they're just brain-washed. Everything about it is still communist. As "bad" as we have it in the U.S. I'd still much rather be here.
Chinese market predicted to be that big is sweet too, but its just predictions.

Posted Apr 27, 2006 3:42 pm GMT
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crystos

i like the fatigue system! makes some of ur american kids get off there butts and get outside

Posted Apr 27, 2006 9:16 am GMT
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Thanos_of_MW

A $2.1 Billion industry? With the rampant piracy in China I seriously doubt it.

Posted Apr 27, 2006 7:37 am GMT
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yzzf

the major barrier for ms, sony and nintendo to join chinese market is the price, if they sell the games at the price as what they do in other markets, i doubt if they can sell more than 100 copies. cos a lot of people in china earn less than US$250 a month, u can't expect them to expend 1/5 of their monthly income to buy a game.

Posted Apr 27, 2006 5:54 am GMT
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BYS2

sony will rule them all

Posted Apr 26, 2006 7:39 pm GMT
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GamePro007

i know nintendo has already influenced some of china with the ique...i think nintendo is poised to delve into that market

Posted Apr 26, 2006 9:46 am GMT
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NeoJedi

If it's online and has bright colors, it'll sell in China...

Posted Apr 26, 2006 7:32 am GMT
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ObiKKa

LOL!

Posted Apr 26, 2006 5:08 am GMT
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chrisdojo

well, since they are limited to how long they can play an MMO, to get around it you would have to buy more MMO's to get in more play time......making a surge of sales in the market. right?

Posted Apr 26, 2006 4:50 am GMT
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ObiKKa

Good. That has to happen. Let 'em in China earn the same kind (maybe slightly less, but nonetheless) of wealth as we do in the developed countries, coz the game developers/publishers seriously need more sales & better chance of profiting!

Posted Apr 26, 2006 4:27 am GMT
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wudi31898

LaiGaiGeng
see into a stone wall .
i agree with you !

Posted Apr 26, 2006 1:41 am GMT
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LaiGaiGeng

I think everyone has forgotten to take into account that China, becoming a major gaming nation, will be able to develope their own games and consoles (years from now). When that happens, it will brighten the dynamics of gaming, and introduce a much needed boost around the world. Let's face it, video games aren't as original/creative as they once were.

Posted Apr 25, 2006 11:48 pm GMT
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Chromebound

When the Chinese president visited America he didnt see the President of America but instead went to meet Bill Gates. And there is still a fair amount of animosity in China towards Japan after the WW2 thing and if you don't believe me, read up on it. So I doubt you'll see Sony or Nintendo doing very well in China but Microsoft has a good chance, or at least, a better chance than its competitors, in one of the fastest growing markets in the world.

Posted Apr 25, 2006 11:09 pm GMT
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ROTO_DQ

In fact,many teenagers like sony.but YA like nintendo more,because they grows with nintendo's games,include me.

Posted Apr 25, 2006 10:13 pm GMT
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chimneysmoke

wow

Posted Apr 25, 2006 9:47 pm GMT
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SnowFarmer

This is good news for Chinese gaming companies. But I doubt it will have a huge effect to other markets. I don't see Chinese games becoming as big a force in the world as Japanese or even American games. Maybe in the distant future it might happen, but not by 2010, not even by 2020...

Posted Apr 25, 2006 9:21 pm GMT
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yiwind0101

China,an owesome fast growing country,not only in online games,but everything.

Posted Apr 25, 2006 8:35 pm GMT
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SENoLimit

I donno... Some Mainland China ppl hates the Japanese including Sony and Nintendo...

Posted Apr 25, 2006 6:22 pm GMT
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matt7899

lets hope we dnt get the bird flu

Posted Apr 25, 2006 5:07 pm GMT
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jeebs213

China needs to lighten up

Posted Apr 25, 2006 5:04 pm GMT
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titusandro

M$ doing well? How many X Box games ARENT violent or promote the things they stated were good in the chinesse market? The company of shooters has very little to give to the chinesse market IMO. Nintendo seems to be the one headed in the right direciton.

Posted Apr 25, 2006 4:48 pm GMT
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noxian

I don't see why MS can't do well in China. MS has bombed horribly in Japan (and if you think otherwise...well....you must not read EVERY sales report coming out of Japan....). But in some other places in Asia, namely Korea offhand, which is probably the next biggest rising game market there, MS has made more inroads than Sony has. at least with the devs. Japan is still by far the biggest player in the area, but you were saying they'd never make it in anyplace in Asia. Thats not true, like i said, they've already done great in Korea.

Posted Apr 25, 2006 4:32 pm GMT
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ATISolidSnake

UMCP wrong it't actually Japan O and Macantosh sucks

Posted Apr 25, 2006 4:32 pm GMT
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UMCP

China is getting stronger and stonger in everything..

Posted Apr 25, 2006 4:29 pm GMT
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AnimeMasters

Oh its not only political hatred between the Big Six and Nippon... The people hate eachother regardless.

Posted Apr 25, 2006 4:23 pm GMT
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rbrignoni

Maybe it's no coincedence that the Chinese President had dinner at Bill Gates House. As Arseno Hall would say: "Things that make ya go hmmmm".

Posted Apr 25, 2006 4:07 pm GMT
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cajunXLVII

isn't the american gaming industry 6 or 7 billion a year? 2 billion by 2010 isn't that much. but i don't want to see western developers making their kind of boring games.

they say their government doesn't want "killing" games but WoW sells well there? i dont understand this.

Posted Apr 25, 2006 4:04 pm GMT
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jamil2nice

true, China really wants to be more self sefficient
other than large MMO's, few games really make an impact in China
and of course, the political hatred between China and Japan don't help either
(they made a game about killing Japanese people)
they also are attempting large a lot of competition for American and Japanese computer and hardware companies

Posted Apr 25, 2006 3:58 pm GMT
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rbarahona

China will be a major driving force in a lot of markets in a few years. They have developed their own 3G standards (for mobile communications), have designed their own O.S. and their onw chip. I think that we will be seeing more and more content being played in China and developed in China.

Posted Apr 25, 2006 3:46 pm GMT
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veracity024

wait til they start drivin as many cars as we do...... then ill be too poor to drive to buy video games...... since less than 15 % of them have cars, more of them play video games than own cars.

lol

Posted Apr 25, 2006 3:45 pm GMT
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Orasion_Seiz

gaming has always been big in Asia not only in China but also here in the Philippines.

Posted Apr 25, 2006 3:38 pm GMT
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gameloverx

hey good job China

Posted Apr 25, 2006 3:31 pm GMT
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swanlord

From what i understand Sony has been banned from the country because they offended the country with the PS2....Sony is not allowed back....there was a article on gamespot about this ...or you can google it. Currenntly Microsoft is in negotiation with the chineese governmnet and are awaiting their approval.

Posted Apr 25, 2006 3:17 pm GMT
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raiden7890

whoever is first to attract the chinese gaming crowd will earn tons of profits

Posted Apr 25, 2006 3:15 pm GMT
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Donkeljohn  

The more affluent the Chinese get, the more likely they may be to take up gaming as a recreational endeavor. With over a billion people, mostly single males, that would create quite the demographic for gaming to gain popularity.

Posted Apr 25, 2006 3:07 pm GMT
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thisissami

either nintendo or sony, i doubt microsoft will have big impact in any of the far eastern countries

Posted Apr 25, 2006 3:04 pm GMT
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shahkanon

lol the fatigue system sounds interesting. Something that might get lazy bums in our country to start doing something. Not saying ive never played more then 3 consecutive hours.

Posted Apr 25, 2006 3:03 pm GMT
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Rendarian

/\ Or Nintendo

Posted Apr 25, 2006 2:57 pm GMT
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ccgod

But the big question is are they gonna favor M$ or Sony

Posted Apr 25, 2006 2:56 pm GMT
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koolgg

lol! at tbone..that made ma laugh

Posted Apr 25, 2006 2:55 pm GMT
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blackIceJoe

THats good hope it brings a lot more for them.

Posted Apr 25, 2006 2:45 pm GMT
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tbonetrav18

Good for them. Congrats China

Posted Apr 25, 2006 2:33 pm GMT
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