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Phoenix Generation series of reports covering Chinese youth
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Defining the Phoenix Generation
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“Phoenix Generation” to describe
in-depth lifestyle study on Chinese youths
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attitudinal shifts and “what’s hot” in games, economic times and most do not
Internet, entertainment, technology, fashion, have any siblings as the result of the
and consumer products. one‐child policy.
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5. Table of Contents
Methodology ..........................................................................................................1
Glossary of Terms and Abbreviations.....................................................................3
Defining Online Games...........................................................................................4
Executive Summary ......................................................................................... 6
PC Hardware.................................................................................................... 8
Internet and Broadband ................................................................................ 10
Speed and Price of Broadband .............................................................................14
“The Great Firewall of China”...............................................................................14
Chinese Attitudes Towards the Internet ..............................................................15
Internet Cafes ................................................................................................ 17
Demographic Profile.............................................................................................18
Government Regulations......................................................................................19
Unique Characteristics of Online Games ........................................................ 22
Online Games Marketing......................................................................................24
Games Market Top Trends............................................................................. 26
Company Updates ................................................................................................26
Seeking Content Worldwide.................................................................................28
New Market Entrants and Emerging Companies .................................................30
Lack of IPOs...........................................................................................................31
Rising ARPU ..........................................................................................................31
Sichuan Earthquake on China’s Online Game Market .........................................33
Games Market Forecasts ............................................................................... 34
MMORPG..............................................................................................................36
Casual Games .......................................................................................................36
Casual Games Revenue Models ...........................................................................37
In‐Game Advertising.............................................................................................37
Drivers to Growth ................................................................................................38
Inhibitors to Growth ............................................................................................41
Top Online Games................................................................................................43
Games Market in China – Contact us for more information i
6. Leading Game Publishers and Operators............................................................48
Giant Interactive Group.......................................................................................52
Key Highlights .......................................................................................................52
Strategy.................................................................................................................53
Games...................................................................................................................55
Zhengtu Online .....................................................................................................55
Financial Information ...........................................................................................61
Future Outlook .....................................................................................................61
NetEase ......................................................................................................... 62
Key Highlights .......................................................................................................62
Strategy.................................................................................................................63
Games...................................................................................................................65
Financial Information ...........................................................................................67
Marketing Developments.....................................................................................69
Future Outlook .....................................................................................................69
NetDragon ..................................................................................................... 70
Key Highlights .......................................................................................................70
Games...................................................................................................................71
Financial Information ...........................................................................................73
Marketing Developments.....................................................................................74
History ..................................................................................................................74
Future Outlook .....................................................................................................75
Shanda........................................................................................................... 76
Games...................................................................................................................77
Financial Information ...........................................................................................79
Marketing Developments.....................................................................................81
History ..................................................................................................................81
Future Outlook .....................................................................................................82
Sohu.com....................................................................................................... 83
Changyou..............................................................................................................83
Key Highlights .......................................................................................................84
Games Division .....................................................................................................84
Tianlong Babu .......................................................................................................85
Blade Online .........................................................................................................86
Upcoming Titles....................................................................................................87
Financial Analysis..................................................................................................87
Future Outlook .....................................................................................................88
Games Market in China – Contact us for more information ii
7. Tencent.......................................................................................................... 89
Key Highlights .......................................................................................................89
Products................................................................................................................89
Financial Information ...........................................................................................93
Marketing News ...................................................................................................94
Future Outlook .....................................................................................................95
The9 Limited.................................................................................................. 96
Key Highlights ......................................................................................................96
Strategy.................................................................................................................97
World of Warcraft ................................................................................................99
Games.................................................................................................................100
Financial Information .........................................................................................101
Marketing Developments...................................................................................103
Future Outlook ...................................................................................................103
Perfect World .....................................................................................................104
Key Findings........................................................................................................104
Strategy...............................................................................................................104
Games.................................................................................................................105
Financial Information .........................................................................................107
Guangyu Huaxia .................................................................................................110
9you .............................................................................................................111
Games.................................................................................................................111
Audition ..............................................................................................................112
Future Outlook ...................................................................................................113
Kingsoft ........................................................................................................114
Games.................................................................................................................114
Financial Analysis................................................................................................116
Marketing Developments...................................................................................117
Conclusion ..........................................................................................................117
Games Market in China – Contact us for more information iii
8. Appendix: Socio‐Economic Overview, Software Piracy and Government
Regulations.........................................................................................................118
Socio‐Economic Overview.............................................................................119
Economy .............................................................................................................119
Development in the Western Regions ...............................................................120
Population ..........................................................................................................121
Per Capita Income ..............................................................................................121
Regional Differences...........................................................................................122
One‐Child Policy..................................................................................................124
Gaming Centers ..................................................................................................124
Unique Characteristics of Chinese Society .........................................................126
Guanxi.................................................................................................................127
Transparency and Corruption.............................................................................127
Software Piracy.............................................................................................128
Internet Download and Peer to Peer File Sharing..............................................128
Physical Piracy ....................................................................................................129
Pirate Servers......................................................................................................130
Lack of government enforcement......................................................................131
Low per capita income and consumer habits ....................................................132
Government Regulations ..............................................................................133
Government Agencies Involved in Regulating Games .......................................134
Fatigue System ...................................................................................................135
Games Market in China – Contact us for more information iv
9. Table of Figures
Figure 1: Matrix Comparing Casual and MMORPG Games in China ............................................... 4
Figure 2: Market Forecasts 2006 to 2013 Data Table, $m .............................................................. 6
Figure 3: PC Sales (2005‐2008) ........................................................................................................ 8
Figure 4: Number of Broadband and Dial‐Up Connections in China............................................. 10
Figure 5: Growth in Usage Rate of Gamers ................................................................................... 11
Figure 6: Age of Internet Users ..................................................................................................... 12
Figure 7: Frequency of Playing Games Among Internet Users..................................................... 13
Figure 8: What Aspects of the Internet Should be Controlled? .................................................... 15
Figure 9: Percentage of Internet café users in each city ............................................................... 17
Figure 10: Location for online gaming (multiple‐choice) .............................................................. 18
Figure 11: Age Difference Among Chinese Internet Cafe Users.................................................... 19
Figure 12: Main Purpose for Going to Internet Cafes ................................................................... 20
Figure 13: CounterStrike Online Web site.................................................................................... 26
Figure 14: EA’s FIFA 2 gameplay.................................................................................................... 27
Figure 15: Sohu’s in‐house developed TLBB ................................................................................. 28
Figure 16: QWD1.com screenshot................................................................................................. 30
Figure 17: ZT Online advertisements............................................................................................. 31
Figure 18: Character from Fantasy Westward Journey................................................................. 32
Figure 19: Online Games Market Forecast 2006‐2013 Graph, $m ........................................ 35
Figure 20: Online Games Market Forecast 2006‐2013 Data Table, $m ........................................ 36
Figure 21: Internet Café in Beijing................................................................................................. 39
Figure 22: CrossFire, one of many shooters on the market .......................................................... 42
Figure 23: Top Online Games by Concurrent Users ...................................................................... 43
Figure 24: Top Online Games Operators by Revenue ................................................................... 49
Games Market in China – Contact us for more information v
10. Figure 25: Game Operator Revenue Market Share 2008.............................................................. 50
Figure 26: Select Operator Licensing Relationships ...................................................................... 51
Figure 27: Screenshots of 51.com ................................................................................................. 54
Figure 28: Screenshots of Giant Online......................................................................................... 57
Figure 29: Screenshots of ZT Online.............................................................................................. 58
Figure 30: Giant User Metrics (in 000s)......................................................................................... 59
Figure 31: Giant Interactive Title Matrix ....................................................................................... 60
Figure 32: Westward Journey II and Fantasy Westward Journey Metrics .................................... 64
Figure 33: NetEase Title Matrix ..................................................................................................... 65
Figure 34: Screenshots of Tianxia II............................................................................................... 67
Figure 35: NetEase’s Corporate Net Income and Revenues ......................................................... 68
Figure 36: Screenshot of Conquer Online...................................................................................... 70
Figure 37: Screenshot of Eudemons Online .................................................................................. 71
Figure 38: NetDragon’s Game Metrics .......................................................................................... 72
Figure 39: Top Three Games by NetDragon .................................................................................. 72
Figure 40: NetDragon’s Corporate Net Income and Revenues Graph .......................................... 73
Figure 41: NetDragon’s Corporate Net Income and Revenues ($m) ............................................ 74
Figure 42: Screenshot of Mir II ...................................................................................................... 77
Figure 43: Top Titles by Shanda..................................................................................................... 78
Figure 44: Shanda’s Corporate Net Income and Revenues (in millions) ....................................... 79
Figure 45: Shanda Casual and MMORPG Metrics 2008 ................................................................ 80
Figure 46: Advertising for Sohu’s Tianlong Babu in Taiwan .......................................................... 84
Figure 47: TianLong BaBu Metrics 2007‐2008............................................................................... 85
Figure 48: Screenshots of TLBB ..................................................................................................... 86
Figure 49: Duke of Mount Deer..................................................................................................... 87
Games Market in China – Contact us for more information vi
11. Figure 50: Sohu Financial Performance (In $m) ............................................................................ 88
Figure 51: Tencent Penguin Mascot.............................................................................................. 90
Figure 52: Tencent’s Title Matrix................................................................................................... 92
Figure 53: Tencent’s Corporate Net Income and Revenues ($m) ................................................. 93
Figure 54: The Brands of Tencent’s Gaming Business................................................................... 94
Figure 55: Screenshot of the Burning Crusade.............................................................................. 99
Figure 56: Screenshot of Soul of the Ultimate Nation (SUN) ...................................................... 100
Figure 57: The9’s Corporate Net Income and Revenues............................................................. 102
Figure 58: Screenshots of Zhu Xian ............................................................................................ 105
Figure 59: Perfect World Select Titles Matrix............................................................................. 106
Figure 60: Perfect World Financial Analysis Q4 2008.................................................................. 107
Figure 61: Perfect World 2008 Fiscal Year Financials.................................................................. 108
Figure 62: Perfect World ARPU, Average Concurrent Users and APA ........................................ 109
Figure 63: Guangyu Huaxia’s games............................................................................................ 110
Figure 64: Screenshot of Audition ............................................................................................... 113
Figure 65: Screenshot of JX Online 2 ........................................................................................... 115
Figure 66: Kingsoft MMORPG Metrics Q3 2008 .......................................................................... 116
Figure 67: Key Country Metrics ................................................................................................... 119
Figure 68: China’s Population by Age Group............................................................................... 121
Figure 69: Map of China’s Provinces ........................................................................................... 123
Figure 70: Major Cities in China (Population in millions) ............................................................ 125
Figure 71: Baidu screenshot ........................................................................................................ 128
Games Market in China – Contact us for more information vii
