When it comes to developing and selling software in China, many producers are deterred by the very high levels of piracy. Intellectual property theft, which hampers original creations and discourages China-based productions, is especially acute than in the nascent video games industry. It is estimated that more than 95 percent of the international best selling games sold on the Chinese market and made by the likes of Sega and Nintendo are illegal copies.
Despite this .depressing statistic, the French producer Ubi Soft chose in 1996 to open a facility in Shanghai, a decision that has since led to a rapid expansion. "We had three people in 1996, 100 by early 1998 and there are now more than 200 people involved in games production and distribution. We are now the biggest entertainment software company in the country," comments Mr Gilles Langourieux, general manager of Ubi Soft Productions in China, and one of seven Shanghai-based expatriates.
Since inception in China, Ubi Soft has established a two-pronged development strategy. The first priority was to adapt the existing range of Ubi Soft products for sale to the local market. "We do this to satisfy the growing number of Chinese game fans who want to play in Chinese. Localised product sales in China represent 25 percent of our activity," says Langourieux.
Localisation has involved translating Ubi Soft best sellers for the Chinese market, with French literary translators working on the script and Shanghai Television Station Dubbing Studio recording the sound. Already, famous Ubi Soft creations, such as POD and Rayman, which is now the number one best seller in China's entertainment software market, can be found everywhere in China.
This experience has given the French company an incentive in developing its second strategy – designing new games for export all over the world. As a result, Ubi Soft opened its first production studio in Shanghai in August 1997 – another studio with 50 staff has just been opened in Beijing with the ambition of mastering all stages of multimedia creation, from the conception process to distribution, marketing and sales.
"These Chinese studios have developed at a much quicker pace than most international video games studios elsewhere in the world, including those of Ubi Soft," explains Mr. Michel Guillemot, general manager of Ubi Soft Entertainment Group and one of the five founding brothers of Ubi Soft. Now, having launched more than 20 entertainment and educational software titles in China, Ubi Soft is preparing to release its first 100 percent locally made car racing simulation game.
The Monaco Racing Simulation for Playstation, whose development cost is estimated at US$ l 0m, will be the first game made in China to be released simultaneously in Europe, America and Asia. The Ubi Soft approach is perceived as unique since most of its American and Japanese competitors have preferred to set up joint ventures with Chinese studios. These joint ventures don't undertake original productions, but instead have concentrated on subcontracting work to foreign-based studios.
Considering the emphasis on developing high-technology products, the Chinese authorities are said to be enthusiastic about the prospect of more original production work being undertaken in China. "They are very interested and committed because they realise that, for the first time, China is going to export a new software to the international marketplace," says Langourieux. "China was not present in video games, and now Chinese culture is starting to get integrated into this software."
To achieve its objectives, Ubi Soft places a lot of emphasis on training staff, whose average age is just 25 years. Some 90 percent of the staff have degrees from renowned Chinese institutions including Jiatong and Fudan universities, the Central Arts & Crafts Academy and Central Academy of Fine Arts. Ubi Soft also provides opportunities for its top employees to visit production studios abroad and to participate in training seminars. "The heaviest investment is not in equipment but in know-how having our staff sent abroad for training and flying specialists to China," explains Guillemot.
In spite of all these efforts, Ubi Soft does not expect quick returns in China. Sales are increasing at a steady rate, but the market is far from mature. "The Chinese are buying hardware equipment, but they are just coming to realise the importance of software," says Langourieux. "This is why China is less creative in software than in hardware."
It is also a country with fewer computers than most industrialised nations, although this is changing rapidly. According to estimates, there are between 10 million and 15 million individual computers in China and the market is rising by around 40 percent a year. Total computers sales were Yn130bn in 1997 and are expected to grow to Yn200bn by 2000.
Although there are no detailed statistics on video game users in China, Ubi Soft believes it is targeting the same type of customers as in the West – teenagers and the under 35s. However the French group believes there is an important difference in China: Chinese parents are likely to insist that a teenager uses the family computer first or exclusively for educational purposes.
Bundling with hardware sales
Video games and internet users tend to belong to the same population group. A recent survey showed the number of Chinese internet users to have soared to 2.1 million in 1998 from 670,000 in 1997, a majority of them young people. According to a sample study involving 22,177 people, 90 percent of the users were under 35 years old.
Access to computer video games could be soon boosted by Microsoft's new Venus operating system designed to allow Chinese electronic firms to combine a web browser, computer software and video compact disc player in a single box attached to a television set. It is aimed at people who cannot afford to buy a personal computer – China has an estimated 320 million television sets.
As pirated compact discs have caused a substantial increase in CD player sales during the last few years, computer sales are boosted by the plethora of pirated software selling for just Yn10-15 each. "All video games, including ours, are found in pirated versions in China," says Langourieux. "It is only when China becomes an important software production centre that it will implement copyright regulations. At the moment, the only way to prevent piracy is to combine software and hardware sales."