New Report On China’s Online Game Industry-$3.6B in 2009 Revenue, $9.2B By 2014
- Posted by bbishop
- on April 1st, 2010
Niko Partners, the leading market intelligence firm on China’s video game industry, today announced preliminary results from its upcoming Annual Review & Five-Year Forecast on China’s video game industry, citing $3.57 billion in revenue from online games in 2009. The annual review and forecast on online gaming and Chinese gamers shows strong growth by Chinese online game operators, despite a harsh regulatory environment particularly for foreign games, and a gamer base that has become increasingly discerning about game quality. Niko had forecasted 2009 revenue to reach $3.65 billion. For 2010, the firm predicts that the online game market will reach $4.5 billion and enjoy a healthy CAGR of 20.9% over the next five years with revenue reaching $9.2 billion in 2014.
“While the global economic downturn hurt video game publishers in much of the world, China’s online game industry reflected no pain in 2009 and gamers continued to embrace online games as the best inexpensive source of social entertainment available,” said Lisa Cosmas Hanson, managing partner of Niko Partners. “While the era of online gaming is generating lots of interest and growth opportunity in the West, China is one of the countries where online gaming is a well established market segment that extends its reach to more and more Chinese consumers every year.”
Niko’s upcoming report will include data and analysis on all segments of China’s video game industry, gamers, Internet cafés, developers and regulations. Key insights about online games and Chinese gamers in the report include:
Chinese gamers prefer the Free-to-Play (F2P) model of online games in which online operators generate revenue via the virtual economy, rather than the time-based model in which access is provided for a fixed number of pre-paid hours.
63% of gamers surveyed increased their spending on online games in the past year.
Social Networking Sites (SNS) games have gained popularity among Chinese consumers, and 88% of the gamers Niko surveyed claim to play SNS games.
The primary reasons gamers with PCs at home go to an Internet café are to be social with their friends and to participate in gaming competitions.
At least 65% of gamers use Internet cafés at least part of the time.
There were 68 million online gamers in China by our definition at the end of 2009 and by 2014 the number should reach 141 million, a 15.5% CAGR.
The growth of this market has generally been reflected in the performance of the listed game companies like Perfect World, Shanda Games, Changyou, Netease, Giant and Tencent. But as with any large and growing market, competition will only intensify. This recent story in the Chinese press argues that the big Chinese game firms will likely see margin pressures going forward as more competitors launch games, as other, lower ARPU (Average Revenue Per User) options like SNS games become increasingly popular, and as their costs, including labor and marketing, continue to rise. So while the market may be growing rapidly, could the glory days be coming to an end for China’s big game firms?
Gaming is still the biggest market by revenue in China’s Internet. Online advertising in 2009 was somewhere in the neighborhood of $ 2B, and I believe most analysts expect online ad spend to increase by 30% in 2010. So online advertising in China is growing, but it will be smaller than online gaming for quite some time. Unfortunately for foreign game companies, the Chinese government has very clear regulations that hobble most foreign participation in this massive market, even while the Chinese game firms are expanding rapidly overseas.
Please tell me what you think in the comments.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Bill Bishop is an American living in Beijing. He is bilingual and has experience working in both US and China. In 1997 he co-founded CBS MarketWatch and stayed until the sale in 2004 to Dow Jones. He was never a journalist, and instead worked in several business roles over the years, the last as head of the MarketWatch consumer Internet business. More »
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