US-based Electronic Arts, the world's biggest video game producer, announced plans to set up a development studio in China, hiring up to 500-staff. EA is best known for its sports and strategy titles and aims to combine that expertise with local talent to capitalize on China's growing demand for online gaming.
For those not in-the-know, online gaming involves players paying a subscription of around RMB 0.3 an hour to compete against other users via the Internet. Choices range from Lord of the Ring's-style fantasy worlds complete with knights and wizards to a more sedate virtual backgammon.
While a growing number play from home, thousands of – mainly male – addicts spend hours at a time in Internet cafes or after hours at work doing battle with each other. While the subscription fees may be small, a recent survey by International Data Corp found that the large numbers of gamers and the pastime's growing popularity would cause the market to grow fourfold to US$622 million, between now and 2007.
Entering the market would give firms like EA a way into the China market while avoiding the software piracy that has undermined revenues from its console-based games. Erik Hachenberg, the company's head of online gaming, is relocating to Shanghai to oversee the studio's development, becoming a central part of what EA expects to be more than US$1 billion in annual revenue from Asia by 2010. The company is also thought to be looking at the potential market for accessing games via mobile phones.
At present Shanghai-based Shanda Interactive Entertainment claims a 37% share of China's online games market.
Shanda is China's largest Nasdaq-listed company with a market value of US$2 billion. In the second quarter of 2004, the company reported a doubling of sales and said it was serving an average of 1.2 million concurrent users.