China online game companies plan US games

China's biggest online game companies are increasingly looking to offer games in the U.S., bringing with them a game model where users play for free but must pay to get certain power-ups for their characters.

Companies like Shanda Games, Perfect World and have tapped China's huge pool of young Internet users with their games and raked in revenue from sales of virtual items. Players pay real-world cash for items like powerful magic weapons that help them defeat enemies, or for virtual clothing or pets to refine their online image.

Many popular online games in China draw on well-known cultural themes like martial arts or the wars of the nation's ancient Three Kingdoms era. But China's game companies face a new culture, different user preferences and competition from market leaders like Activision Blizzard as they work to expand in the U.S.

"All of them are looking to figure out how they can move beyond China, either by licensing their games to overseas operators or by opening overseas offices of their own," said Mark Natkin, managing director of Marbridge Consulting in Beijing.

Online games are a major industry in China, which has more Internet users, at 384 million, than the U.S. has people. Over 100 million Chinese played online games last year, according to local consultancy Analysys International. Imported games like World of Warcraft are widely played alongside Chinese games.

Shanda Games drew eyes last week by unveiling plans to acquire Mochi Media, a U.S.-based game network that Shanda says will distribute its games worldwide. Shanda, which like Changyou and Perfect World has raised funds by listing its stock in the U.S., will dish out US$80 million in the acquisition.

The move highlighted Shanda's ambitions abroad. Shanda also has plans with local operators to offer six of its games in the U.S., said Diana Li, CEO of Shanda Games, in a phone interview. Li declined to name the games but said they would keep the free-to-play model they have used in China. By contrast, many U.S. games rely on subscription fees for revenue and do not sell in-game items for real cash.

Shanda's popular titles include fantasy role-playing games World of Legend and Legend of Mir. Shanda is also looking at offering games in Europe, Li said.

Shanda rival Perfect World has already launched several games in the U.S. and offers them under altered names including Jade Dynasty and Ether Saga. Changyou late last year started open beta testing in the U.S. for Dragon Oath, a martial arts game.

A big challenge for the Chinese companies could be promoting their games in the U.S., and games closely linked to Chinese culture or history may not do well, said Natkin of Marbridge Consulting.

"There are certain cultural themes that just never seem to get old for that culture... but they won't find as big a market overseas," said Natkin. Users in the U.S. also may not take well to the cute, cartoon-like animation popular in some Chinese casual games, Natkin said.

Li of Shanda argued the U.S. online game market is at an early stage and has room for new titles to rise alongside leaders like World of Warcraft. When asked if Shanda would revise game content to fit the new market, Li said its U.S. plans involved games that would appeal to users anywhere.

Chinese authorities have promoted moves overseas by the country's online games. Online games exports from China drew revenue of more than US$100 million last year, a nearly 50 percent rise from the year before, according to the Ministry of Culture.

Copyright © 2010 IDG Communications, Inc.

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