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October 18, 2005 5:55 pm

Role-playing in 3D starts to take off

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Within three months of its official China launch in June, US developer Blizzard Entertainment’s World of Warcraft online role-playing game had attracted more than 2m paying players – as many as it has in the rest of the world.

That is good news for Zhu Jun, brash young chairman of The9, the Nasdaq-listed Chinese company that distributes World of Warcraft in China. Mr Zhu says he faced down sceptics a year ago when he pushed to win distribution rights for the game, which uses three-dimensional graphics that require players to use a relatively advanced personal computer.

“I thought that, if I was judging the market right, then The9 would be the first to benefit from the shift to a 3D games market in China,” Mr Zhu recalls. “Now it is clear that I was right.”

World of Warcraft’s success highlights the explosive growth and increasing importance of the country’s market for such “massively multiplayer online role-playing games”, or MMORPGs.

Almost unknown five years ago, MMORPGs are now played by an estimated 25m Chinese or a quarter of internet users. According to a recent report by Morgan Stanley, online game revenues soared 90 per cent in 2004 to US$390m, and are set to grow at an annual rate of nearly 40 per cent over the next three years.

The servers of the country’s leading games companies host teeming hordes of fantasy characters ranging from elves to kung fu clerics, all battling monsters, going on quests, socialising and trading virtual items.

By the first half of 2005, an average of more than 1.5m users were playing China’s five most popular games at any one time. At peak times, the number would soar above 5m, with Legend of Mir II, a Korean game licensed by local distributor and developer Shanda, accounting for nearly half of players online.

There are several reasons for the extraordinary success of MMORPGs. First is a lack of competition. In comparison to western countries, Chinese children are starved of entertainment options. Many less developed areas have almost no recreational facilities, while in richer eastern cities, cinemas or karaoke bars are an expensive option. By contrast, broadband access to online games from internet cafés is less than 50 cents an hour.

Companies such as Shanda, number two player Netease, and The9 have proved adept at building distribution systems that can market their pre-paid access cards to players even in small rural towns.

With their subscription-based model, MMORPGs are more resistant to piracy than console games, while parents see computer use as important for the development of their children.

“Not many parents are willing to buy a games console for their kids but they are more than willing to buy a computer,” says Bruce Ren, chief operating officer at Kingsoft, China’s number four games company.

Not everyone is pleased by the success of online games. Fears are growing about their social impact, with critics in the media and communist party youth groups blaming MMORPGs for fostering sloth, truancy and even murder.

Games companies have sought to soften criticism by agreeing to a code of conduct and introducing an “anti-online game addiction system” to their games.

The anti-addiction system is designed to protect players’ mental and physical health by nagging them into logging off after a “healthy time” limit of three consecutive hours.

The new rules may slim margins, but they are far from the biggest challenge that Chinese games companies face.

Competition is increasing as new entrants rush to the market. And most local companies remain reliant on games licensed from foreign developers, which are barred from operating directly in China.

That is the case for The9, which has only one game developed in-house: Joyful Journey West, a fairly primitive one-dimensional MMORPG.

Mr Zhu insists he is only a year away from releasing more impressive self-developed games.

However, The9 has had a recent reminder of the risks of getting it wrong. It has been losing money this year in part because of a decline in popularity of one of its games due to tougher competition, vulnerability to cheat programs and problems with pirate servers.

Indeed, Mr Zhu now says The9’s best chance of out-flanking rivals is to expand into south-east Asia, a region where it has no obvious competitive advantage.

Similarly, market leader Shanda has embarked on a bold but hazy bid to become a general media company.

There certainly appears to be a lack of creative differentiation between the big companies’ games, most of which are based on acquiring treasure and experience in fantasy worlds.

Still, some games clearly stand out, and Mr Zhu can hope to ride World of Warcraft’s success for a while yet.

Even Mr Ren of Kingsoft admits to the games appeal. His 11-year-old son has been pressing him to buy a new graphics card for his computer so he can play it.

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