Online gaming sweeps China; hourly rate less than 50 cents

BEIJING: At one of Beijing’s many Internet cafes, near-silence reigns: headphones on, eyes glued to the screen, web users play games online en masse, helping to make China one of the industry’s top markets.

Young men crowd around terminals for role-playing adventure games while women gamers tap away to keep troupes of dancers in line — and international companies want part of the action.

In 2009 the industry raked in nearly 26 billion yuan ($3.8 billion), up 39.5 per cent over the previous year, according to government data. But experts say the booming market will mostly benefit homegrown firms, whose products are more closely tailored to the tastes and preferences of the more than 380 million people using the Internet in China.

“Foreign game developers are having a tough time competing in China,” said Daniel H Vlad, a senior analyst specialising in the online games and e-commerce sectors for research house JLM Pacific Epoch in New York. “So far only one Western game, World of Warcraft, has really succeeded in China,” he said. “Chinese users spend significantly more time playing games than their Western counterparts. Foreign games typically fail to deliver enough content... Chinese gamers eventually lose interest and move on.”

Lisa Cosmas Hanson, the founder of Niko Partners which provides market intelligence on China’s video game industry, explained that gamers here like a variety

of challenges, from cultural and mythical history adventures to sports. She said

that beyond the cultural differences keeping foreign developers from breaking through to Chinese gamers, opaque government regulations in a sector tightly controlled by the ruling Communist party are the “biggest hurdle”.

“Games created in China account for more than 60 per cent of the market,” said Yu Yi, an analyst for IT research firm Analysys International. Three firms, all listed in New York on the Nasdaq, are leading the way: Tencent, Shanda and NetEase — which has the operating licence for World of Warcraft in China.

According to Analysys International, the firms held about 24, 20 and 16.5 per cent of the market, respectively, in the fourth quarter of 2009. The online games sector is charging ahead thanks to the exponential growth of China’s web community, now the largest in the world. Cheap computer products and relatively inexpensive Internet access have also fuelled the trend.

Vlad said the key driving factor behind the success of online gaming in China has been “the increase in quality, innovation, and the variety of game choices targeting all demographics”. The online market research firm iResearch said the sector will remain “at the heart of the Internet economy” for years to come, with annual growth of about 20 per cent. Analysys International predicts that by 2012, the market will nearly triple from 2009 levels to about 73 billion yuan, with more than 270 million players. The government has expressed some concern about the trend, with a survey showing that 24 million young people — half of them gamers — were addicted to the web.

At cybercafes in central Beijing, an hour’s play costs three yuan (less than 50 US cents).