SEOUL - South Korean
online game companies are keen to tap the
potentially lucrative Chinese market, but their
push is hitting a snag due to state regulation,
heated competition and rampant piracy, analysts
say.
Despite their efforts to gain a
firmer foothold in the fast-growing market, South
Korea's top online game maker, NCsoft Corp, and
others have seen their market share keep falling
since their entry in late 2002.
According
to the latest data by the Korea Game Development
and Promotion Institute, the market share of South
Korean online game products decreased to 45% in
2005 from 51.9% in 2004, the third consecutive
yearly fall.
From 2001 to 2005, China's
online game-publication industry has
grown rapidly, according to
figures from China's General Administration of
Press and Publication (GAPP).
China's
online game market is forecast to rise to US$623
million in 2006 from $403 million last year before
soaring to $1.1 billion in 2008. The number of
online gamers is expected to exceed 33.6 million
in 2006, up 27.6% from more than 26.3 million in
2005, according to the data.
Market
watchers point out that the main hurdle to South
Korean companies' push is the Chinese government's
move to protect its games industry.
"With
the market rapidly growing, the Chinese government
started to protect its game industry through
regulations, putting the South Korean online game
firms at a disadvantage," Daewoo Securities
analyst Kim Chang-kwean said.
The Chinese
government has prolonged the process of issuing
licenses to South Korean online-game firms and
made it difficult for them to set up wholly owned
subsidiaries, forcing them to establish
partnerships to operate there, he said.
Kang Lok-hee, a senior analyst at Daishin
Securities, echoed Kim's view. "The rule helps
foster the Chinese game industry because Chinese
firms easily acquire technology through tie-ups."
On top of the state regulation, South
Korean companies are increasingly faced with stiff
competition from local players.
Chinese
online-game companies, including Shanda
Interactive Entertainment, have started to come on
strong with well-designed games of their own, the
latest edition of BusinessWeek magazine reported,
citing a report by market research firm IDC.
According to the data by the South Korean
game institute, the number of Chinese online games
in the market reached 70 in 2005, up 33 from the
previous year, while the number of South Korean
games stood at 85 last year, compared with 80 in
2004.
"Although the market pie itself has
increased, it is not easy for Korean companies to
perform better due to a rise in the number of
Chinese game producers and foreign players,
including US publisher Blizzard Entertainment,"
said Yun Jin-won, a public relations manager of
NCsoft.
The rampant piracy in China has
also been dealing a blow to South Korean
online-game manufacturers' plans to increase their
influence and generate more profits in that
market.
"Losses from Chinese knockoffs are
significant," said Kim Yu-jung, a public relations
manager at Wemade Entertainment, a South Korean
game company.
In 2001, Wemade
Entertainment formed a partnership with Shanda to
handle the online service of role-playing game
Legend of Mir II, but the Chinese company released
a pirated version with a different name in the
market.
Wemade Entertainment filed a
lawsuit against Shanda with a Chinese court in
2003, alleging the Chinese company violated its
intellectual property rights. The case is still
pending, while Chinese authorities are urging an
out-of-court settlement, Wemade said.
To
overcome such difficulties, analysts stressed,
South Korean online-game producers should step up
efforts to tailor their future products to the
tastes of Chinese gamers to win their hearts and
boost market share.
South Korean game
firms have so far concentrated on providing
multi-player role-playing products such as the
Lineage series from NCsoft to the Chinese market,
but they need to diversify into casual games such
as sports and racing, whose popularity has been
quickly rising.
"South Korean firms should
focus on developing creative games customized to
local people to succeed in China," Kiwoom.com
Securities economist Jang Young-soo said.
"Understanding the local culture and gamers'
changing tastes are essential for their future
survival."
Meanwhile, at the fourth China
International Digital Interactive Entertainment
Forum held in Shanghai late last month,
Long Xinmin, minister for China's GAPP, said his
country's online-game industry will maintain
high-speed growth in the next five years. From
2006 to 2010, that growth will reach 35.5%. Long
said. The digital-game industry is improving daily
in China, and the market is expanding and becoming
one of the most vigorous in the world.
Long pointed out that the
interactive-entertainment industry is becoming a
new economic sector worldwide, with the industrial
scale of the digital-entertainment industry
worldwide reaching $222.8 billion. The industry
has developed especially fast in Asia. Statistics
show that by 2009 the interactive-entertainment
market in Asia will be four times the size of
today.
Though the online-game industry
comes late to China, it has successfully fostered
a number of young and vigorous enterprises, such
as Shanda. Meanwhile, the industrial scale of
online games in China is still expanding, with
much more potential.
Statistics show there
are 123 million Internet users in China currently,
of whom 80% are youngsters, and 30 million are
middle- and primary-school students.
To
promote development of the
interactive-entertainment industry, GAPP will
publish policies to encourage more domestic
cartoon enterprises to enter the online-game
industry.
