Market research firm Niko Partners
has released results from its 6th Annual Review & Forecast Report on China's Video Game Industry, a comprehensive study of trends in the online, PC offline, and console gaming segments in the world's most populous country.
Revenue for online games was up 71 percent from 2006 to 2007, to $1.7 billion - with 21% of that figure coming from casual and "advanced casual" titles.
The firm expects a further 47 percent growth next year, with compound annual growth of 29% through 2012 to $6 billion. Niko managing partner Lisa Cosmas Hanson elaborated on the sharp increase in an exclusive interview with Gamasutra.
An Increasingly Game-Aware Culture
"Disposable income is rising, and people are able to spend a more money on games then they have in the past. The number of games has increased because as it becomes a more popular pasttime, the younger kids join this force, and the older gamers continue to play," said Hanson.
"In addition, prices have fallen, so people have bought more home PCs, so they can play more than when they just had to go to cafes. People still go to cafes for competition, however, and in cities where income is not as high."
Niko puts the number of hardcore Chinese gamers at 14 million, with that group playing over 22 hours per week. The number of internet cafes has dropped to 185,000 from 225,000 in 2006, in part due to a ban on new cafe licenses, but the average size of existing cafes is growing, maintaining the total number of PCs.
Massively multiplayer online games are a big part of China's online gaming growth. Said Hanson, "We found that the number of concurrent users in the top ten MMO list has gone up to crazy levels. Where we used to see that it might require an average concurrent user number of 50,000 to be one of the top games, now #10 is 180,000, and #1 [Fantasy Westward Journey] is 515,000."
Console game sales were up 75 percent on a per-unit basis to 2.48 million, but Hanson noted that due to a Chinese console ban in place since 2000, the entire segment persists through the gray market.
Explained Hanson, "Every year we hope [the console ban] gets overturned, and it never does. The gray market is flourishing because there's no legitimate way to obtain these consoles, but consoles are a big part of games. Chinese gamers are in tune with gamers around the world, they're not in a vacuum."
"The big boom this year came from the easier availability of the new next-gen consoles. They're sold through pirate stores, and the government wants to shut those down, and it is frowned upon - but if you ask the US government, the Chinese government isn't doing enough [to cut down on piracy]."
She pointed to PlayStation 2 as being more popular than its successor, on the strength of its affordability, game library, and backwards compatibility, with Wii seeing popularity for similar reasons. Between PlayStation 3 and Xbox 360, Hanson claimed Xbox 360 is more popular in China for its price point and library.
Despite the heavy presence of piracy, sales of legitimate copies of offline PC games still grew 56 percent year over year.
The Worldwide Potential
Despite the surge in the market, Western publishers seem to be slow to adapt products to fit the growing audience. Hanson noted that Chinese-developed games are becoming much more significant sales drivers in the region.
"Actually, 2007 was a year where at least eight of the top ten games were from China--that's something different from past years, where they were a large number of games imported from the West and Korea," she said. "If you look at offline PC games too, they're generated a lot in either Taiwan or the mainland. Popular console titles are from everywhere, but all the console titles are from gray market."
Continued Hanson, "I think the worldwide publishers would be wise to study what's making these games popular, and to generate games for Asia--preferences are different from Chinese gamers to Western gamers. Games that demonstrate they know what Chinese gamers want, like World of Warcraft, will be hit games--but World of Warcraft is of course a hit anywhere."
"Western publishers who can generate good deals with Chinese operators, or appeal to Chinese gamers, can take advantage of that. We encourage our clients to do focus testing to try and tailor to that market. Just because a game is hot here doesn't mean it's going to be hot there."
Hanson pointed out the differences in the revenue models used by most titles in China and the West, the subject of a currently-ongoing debate among online game providers: "Most publishers here develop great games for console and PC offline--they're just now starting to pick up on the subscription and free-to-play subscription-based models, which are popular in China."
As far as consoles, however, it will be tough for console makers to capitalize on a market already so dominated by piracy. "It's really unfortunate for the console makers in the future to try and court these avid gamers as buyers, because they've already gotten them through other avenues--they can't sell them to them legitimately now," she said.
The Games People Play
Niko's report tracks console, offline PC, and online games, but online games are comprised of several segments including full-scale MMOs, casual games, and what the firm calls "advanced casual" games. Increasingly frequently, however, there are casual titles with gameplay approaching that of dedicated standalone games, but with a web-based interface and ease-of-use factor more along the lines of a traditional casual game.
Said Hanson, "The top revenue-generating games are MMOs, but there are high-revenue games in the 'advanced casual' market--dancing games, singing games, basketball games, that kind of stuff.
The casual games--and here's something new for you--have in the past been totally free to play, like board games or mahjong or puzzle games, but now there are Flash-based and sometimes Java-based versions of some of the popular MMOs or real-time strategy games that are easy to play and are shorter in time commitment."
"It's difficult to play multiple MMOs, but a lot of players are playing an MMO and these casual games. They're a good alternative to people actually trying to play all the games on the top ten."
In compiling its report, which is now available, and for which more info is available on the Niko Partners website, the firm conducted some 1,200 surveys in ten Chinese cities in March 2008, obtaining 75,000 points of data from gamers, managers of both legitimate retailers and pirate stores, outsource developers, online game operators, Internet cafe operators, and other sources.
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