Wednesday, July 11, 2007

Growth in Online Computer Gaming: China, India, Korea, and Japan

China Gaming

The China Gaming market is a very big market. The Chinese middle class is growing and showing their increasing purchasing power. According to, and according to research from American Market research firm, DFC Intelligence, "analysts predict strong growth for online games in China. Following the trend of South Korea, online gaming is already one of China's favourite pastimes, but it is expected to be worth a great deal more by 2010: 1.7 billion USD we're told. That's up from a 2005 value of about 560 million USD. " "The game market in China is all about online play and charging by usage. There is even a growing market for the items used in games like weapons and characters," states Alexis Madrigal, one of the experts behind the new report."

The three main players in this market are Shanda Interactive (SNDA), The9 Limited (NCTY), and NetEase (NTES). Shanda Interactive and The9 Limited seem the most investable, having MyPEGs of 0.56 and 0.71 (very cheap). The9 Limited has the right to bring Blizzard's World of Warcraft to China. Shanda Interactive also has a good business model. According to a China online gaming survey conducted by Piper Jaffray, "55 percent of respondents said they prefer Shanda's business model, in which users can play games for free and are charged to purchase virtual items within the games. Shanda also tied with competitor The9 Ltd. as the company in its market that offers the best games."

(Analysis of Computer and Video Game Sector here.)


Now, what about the India online gaming market? According to a report by San Francisco based analyst and consulting firm Pearl Research (and reported by, " online games market in India will exceed $200 million in 2010, as part of a new “Online Games Market in India” report."

According to the report, the "rapid adoption of the Internet with 39 million current users; increasing broadband penetration; growth in Internet cafes with more than 100,000 outlets; and a sizable middle-class with rising disposable income. Most importantly, game operators are promoting and educating consumers about online games including MMOGs."

Local and International publishers are investing in the Indian online games market, as this is one of the few viable publishing models, where "software piracy rates exceed 85%".

However, the $200 Million Indian market by 2010 pales in comparison to China's estimated online gaming market of 1.7 Billion.

Allison Luong, Managing Director of Pearl Ressearch says that "India in 2006 is often compared to China in 2001, when China’s games market started to develop and an online games culture started to form. Within a decade, India has the potential to emerge as one of the top online markets in Asia, along with China, Korea and Taiwan."

India is slow to adopt Online Gaming

However, according to an article by John Ribeiro of IDG News Service (and reported by, the Internet and mobile Association of India and research firm IMRB International (both in Mumbai, India), says the slow uptake in online gaming is partially caused by the "negative perceptions among parents and education institutions." Sohil Kunwar of IMRB says that "Online gaming is considered to be alien and disruptive, and to have an adverse impact on education."

In addition, Sohhil Kunwar says that India has too few broadband connections to homes. There are only 2.21 million broadband subscribers (February 2007), in a country of more than a Billion People.

Opportunity in Indian Mobile Games

In the same report, the big opportunity in India might be mobile games. According to TRAI, "India had 162.5 million mobile subscriber at the end of February. Currently, Indian mobile users can download games from Web sites but are unable to play online."

Korea online gaming

Online gaming in Korea is also very popular. Gravity (GRVY) and Webzen are two popular Korean online gaming companies. Gravity is a small cap publicly traded company (US exchanges) that provides online Games in Korea, but the fundamentals don't look very good. According to an MSNBC article, in Korea, 17 million people play games regularly in a country of 48 million. Close to 70 percent of South Korean households have broadband. And the transfer data speeds in Korea can be up to 50 megabits per second (Mbps). Compare this to AT&T Yahoo! Elite package (DSL) which has download speeds up to 6.0 Mbps. All these, plus the fact that the young people of the country have grown up with the technology help make online gaming in Korea big business.

What about Online gaming in Japan?

Japan, home of Nintendo, and Sony, are more console driven than China and Korea. So, online gaming in Japan is not as popular as it is in Korea and China.

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