A big leap in the business of gaming

For China's young people, online gaming is increasingly popular, and while the costs that gamers pay to play are relatively small, the hundreds of millions of participants are generating billions of dollars of revenue for the games companies.

Virtual reality: online games played in internet cafes have become the leisure activity of choice for young urbanites in China. Reuters

In internet cafes, rows of gamers stare at the screens in front of them. In offices, young professionals log on to social networking sites and play interactive games in their breaks.

Game on Popular games in China

Dragon Nest This game, set in a fantasy land, was released in China last year and is played throughout Asia. Players search for an antidote to a poison, with the aim of helping to wake a sleeping goddess.

World of Warcraft There are plenty of monsters to fight in this game, which although developed by the California company Blizzard Entertainment, has been a big hit in China. Modifications were made for the Chinese market, such as putting flesh on skeletons, as these were deemed offensive.

Fantasy Westward Journey Taking its theme from Journey to the West, one of China's most celebrated novels, this game has been described as the most popular in the country.

On subways, commuters concentrate on mobile phone games on tiny screens as their trains move from station to station.

Gaming is big business in China, and online games are the leisure activity of choice for young urbanites.

"I am very busy, and I like to play internet games to relax," says Niu Yao, 22, a student, as he plays a game called World of Warcraft in an east Beijing internet cafe.

"My friends come here to play as well. They're crazy about it," he says.

Last year, China's gaming industry achieved revenues of US$4.8 billion (Dh17.6bn), according to the market research organisation Niko Partners, up 34 per cent on 2009.

This year, a further expansion is expected, with income set to soar 21 per cent to $5.8bn, and analysts expect this figure to almost double by 2015.

As a result, China's share of the global games market is predicted to increase from about 12 per cent now to more than 25 per cent in 2015.

Estimates have put the total number of Chinese online gamers at 300 million, and companies offering online games can record as many as 20 million users at any one time. In total, 477 million Chinese use the internet, according to figures released this year by the country's telecommunications administrator.

In internet cafes, highly complex online fantasy games depicting warriors on horseback, Chinese temples and fearsome birds of prey are popular. Hundreds of people can be involved in the same game simultaneously.

"They're quite a phenomenon because a lot of people don't have high-speed internet access at home, but in the cafes they do. Many kids don't really have a lot of [other] things to play with," says Michael Zhang, an assistant professor and computer industry specialist at the Hong Kong University of Science and Technology.

For the gaming companies, online games often have the advantage that in a country where piracy is rampant, with an estimated 95 per cent of offline games being pirated copies, users must pay even a little to play.

Some online games are free to play but impose small charges for the virtual goods such as the guns the players need. Individual costs are modest, but the number of users is huge.

Others levy a fee according to how long the player is logged on.

"There are deals between the internet cafes and the game developers.

"This creates a very interesting dynamic. Game developers sometimes pay the cafes to install their games," Prof Zhang says.

Analysts such as Niko Partners have said that while the multiplayer online games that are popular at internet cafes will continue to grow, real expansion is taking place with games linked to social networking sites.

Many of these are played by young professionals, in contrast to the multiplayer games at internet cafes, which are more popular with students.

"When they're at work, sometimes it's very easy for them to play [social networking site games]," Prof Zhang says.

"You just need a few minutes. Everyone in the office has access to the internet. When you need a break, you can easily play web games."

No wonder then that Tencent, which runs the wildly popular QQ instant messaging site - it is reported to have more than 800 million active accounts - is said to have as many as 20 million game users at any one time.

This kind of success, partly fuelled by the restrictions in China on foreign social networking sites such as Facebook, has allowed Tencent to fund major overseas transactions, such as its acquisition in February of a majority stake in the US company Riot Games for $400 million.

"In the long-run, there will be more and more game developers entering the market. If you look at entrepreneurship, some game developers became very popular in the short term," Prof Zhang says.

He cites as an example Kaixin001.com, another social networking site with a strong focus on games.

"It just developed its games from Facebook, but the exponential growth is amazing. It's got venture capital and it's moving to an IPO," he says.

Just as Chinese games companies are targeting overseas markets through acquisitions and by tailoring their games to foreign platforms, so games from abroad, especially other parts of East Asia, have become popular in China.

Significant growth is also expected in China from a field that so far has yet to catch on in a big way: online mobile phone games.

"Most people in China have a cellphone, but not all the cellphones are [internet] connected," Prof Zhang says.

"A lot of the cellphone games are offline. In the future, as the price goes down, [more] people will have access to play social network games. In that sense, mobile phone games will be converging on web games."

While games consoles from companies such as Nintendo and Sony have generated frenzied interest in overseas markets, they have largely been banned in China.

Despite this, Lenovo, a PC maker based in Beijing, is launching through its subsidiary Eedoo a games console called the iSec. Its release has been delayed, and reports last month suggested that a launch this month or next month was likely.

The company is said to have negotiated with the authorities to ensure that the device can be released. Yet commercial rather than regulatory factors may be the biggest stumbling block.

"It's very difficult for new entries [in the consoles market]. Only the currently successful companies can survive," Prof Zhang says.

Consoles are likely to remain peripheral in China in any case, with the modest pricing of online games likely to mean they remain popular.

"These games are a lot of fun," says Gao Jing, 27, a female engineering student playing World of Warcraft at an internet cafe. She says she spends four to five hours a day gaming.

"They are a very interesting way to spend your spare time."