Tiangiao Chen, chairman of Shanda Interactive Entertainment, and William Ding, CEO of Netease.com, are also locked in a real-world Mortal Kombat for supremacy of China's rapidly expanding online gaming space with two radically different business models.
The Chinese market for fantasy and adventure multiple role-playing games shot up 54%, to $460 million, in 2005, and is on track to reach $2.1 billion by the end of the decade. China is even expected to surpass tech-happy.
China's overall Internet user base is enormous -- about 120 million this year and growing fast. Shares of both Shada and Netease, once darlings among U.S. investors hungry for China Internet plays, have fallen on hard times. Shanda shares traded on Nasdaq have slid about 26%, to $16.48, from its recent 52-week high back in November, 2005. Meanwhile, Netease shares on the U.S. tech-laden exchange are off nearly 40% since the end of March, to $15.25.
Shanda's shift away from a primarily subscription fee-based model has been fitful. On Nov. 10, Shanda posted a 43% decline in third-quarter net profits year-on-year, to $18.1 million. However, Shanda and investors did take some solace in the fact that online game revenues increased 9.4% quarter-over-quarter, to $51.7 million.
Shanda is aggressively pursuing tie-ups to keep its online game offerings fresh. In May, Walt Disney'sInternet unit struck a deal with Shanda to distribute and operate games based on Disney's hottest animated characters. And later this year, it plans to launch Dungeons & Dragons Online as well as three other games, including a martial arts number called Kong-Fu Masters that contains well-known Chinese folklore characters such as Mulan and Monkey King.
Shanda, Netease, and others are also trying to beef up the quality and diversity of in-house-developed games. Right now, South Korean developers rule with about a 45% share of the online games in operation in China.
Nexon, a Korean company, offers games through operators in China, and one called Crazy Arcade BnB (for Bomb and Bubble) which goes under the name Paopaotang in Chinese, has an incredible following of 130 million registered users. Chinese online game sites, however, must pay royalty and licensing fees to the South Koreans.
Netease.com, which has developed some smash games of its own, has stuck mostly to a subscription model and has overtaken Shanda as the No.1 online game operator in China. The company scored big with its Westward Journey Online II, which is based on the famous Chinese novel Journey to the West and a film adaptation of that classic tale by Hong Kong actor and film director Stephen Chow Sing Chi.
Its visual style draws heavily from traditional Chinese paintings, and it's one of the most popular games among those developed inside China. This game has attracted more than 83 million registered users. Early next year, Netease will launch a new version of Westward Journey Online and has other games coming on stream. Company Chairman Ding has vowed to spend $400 million-plus to develop new games in the coming years.
While Netease's third-quarter profits rose 21%, to about $40 million year-on-year, in the third quarter, the company warned of an earnings decline in the final quarter due to competition from Shanda and others offering free games.
It's too early to say which company has the smarter strategy in place. But count on plenty of World of Warcraft moments from the Shanda and Netease rivalry in the months ahead.
Source:佚名