Originally posted on Forbes.com:
Several publicly traded Chinese PC online game companies have broken from their stance of focusing only on PC online games by recognizing the trend for the future is the mobile platform. These companies are now scrambling to reinvent themselves in order to catch the boat before newer mobile-only game companies get too far ahead in the race. In 2013 mobile games revenue in China was roughly $1.5 billion, and is expected to rise significantly each year through 2017 (Niko’s 5-year forecast period).
Some online game operators understood mobile gaming to be important and launched divisions of mobile businesses more than a year or two ago, and others are later to the growth because they had opted to focus on their core competency of PC online games and not diversify (but since have decided to do just that). Examples of companies that had already noticed and taken part in mobile gaming are Tencent, NetDragon, and KongZhong KONG -2.22%. Examples of those that had not stated their planned entry until 2013 are Giant, Perfect World , and ChangYou. There is a good argument for focused action on a core competency, and another good argument for getting into a growth segment of a related business (such as mobile after success with PC online games). Niko is not offering an opinion on which is better, just stating what is happening in the market now.
Here is a summary of some of the 2014 mobile moves by Chinese online game operators, followed by a table of investments and acquisitions in 2013 and 2014 in the mobile games space in China.
Giant Interactive: Recently Ms. Wei Liu, CEO, announced that the company will go private and will focus on mobile gaming as well as PC online gaming, and will return to start-up mode in order to conquer the mobile segment.
Perfect World: In 2013, Perfect World (“Wanmei”) CEO Xiao Hong said that mobile games are a critical part of the company’s Global Investment Plan called PWIN. Perfect World has launched two mobile games so far with heavy promotional investment.
NetEase: CEO Ding Lei announced that the company will release 10 mobile games in 2014. NetEase has stated that mobile is a critical segment for their future growth.
Shanda: CEO Zhang Xiangdong says that the company will release 1 new mobile game per month in 2014, after the success of Million Arthur in 2013. He said that in Q3 2013 mobile games represented 14% of the companies total revenue, and it will rise to 50% by 2016. Apart from licensed and self-developed titles, Shanda has a mobile platform called G Family on which they company shares revenue with developers.
ChangYou: ChangYou has announced that it will have licensed and self-developed mobile games in its portfolio, starting with one by Smilegate. ChangYou has a “Billion RMB Strategy” for IP investment, promotion & distribution, and commission to development studios – the CYou Win Plan. The company actively seeks mobile partnerships.
Tencent: Tencent is charging ahead in mobile games through Mobile QQ Game Center and WeChat games. Wang Bo, VP of Tencent Games, said that Tencent’s mobile distribution platform will pay 70% to developers if Tencent does not operate the game, 50% if it does operate the game, and case-by-case if it is an exclusive partnership. The 70% rate will be much lower though, because Tencent also charges “channel fees” and “marketing fees”. The company is facing competition in mobile games operation from Alibaba and Qihoo360.
Kingsoft: Kingsoft has a subsidiary called Westhouse Group, which develops online and mobile games. Xiaomi has some ownership of Westhouse as well and will support games developed by Westhouse. Xiaomi is expanding its reach in mobile gaming with the Xiaomi Game Center under a newley established “Xiaomi Interactive Entertainment” business division.
Investment into Chinese mobile games companies is hot right now, as can be seen by this table of acquisitions and the subsequent table of funding. Publicly traded PC online game operators must invest in mobile games now to keep pace with the trend in the market, and to maintain an advantage over new market entrants. For more information on this topic, watch for Niko Partner’s upcoming 2014 Chinese Mobile Games Market Report on www.nikopartners.com.