Summary:

China’s online games market is huge. Now some of its biggest publishers want to replicate that success in the west. Where does that leave Zynga and Playfish?

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photo: RJ Bailey

Chinese internet users go crazy for online games.

From casual playthings to massively multi-player online worlds, Chinese game half-year revenue rose 16.9 percent from last year to 23.5 billion yuan ($3.7 billion), according to International Data Corp (via Shanghai Daily), with 71.6 percent earned at home.

Now some of China’s leading game operators are looking to go west, as the country’s explosive broadband and mobile adoption growth looks like slowing.

Shanda Games, one of the main publishers, has acquired a majority of German massively-multiplayer online game (MMOG) operator eFusion, which will partner with Shanda’s Eyedentity studio to promote Shanda’s big Dragon Nest MMPORG in Europe (via GamesIndustry.biz).

Shanda is not alone:

  • MICGadget: “Perfect World, a Beijing-based online game company specializing in MMORPGs, expects overseas revenue to account for 30 percent of its total revenue this year, compared with 10 percent in 2011. Perfect World has already set up subsidiaries in the US, Europe and Japan.”
  • Chinese web giant Tencent last year bought a majority of U.S. game studio Riot Games for $231.5 million.
  • Shanda bought up another U.S. studio, Mochi Media.

U.S. players should be under no illusion – the Chinese online and game markets are super-advanced. Some 20.4 million active users on average played Shanda’s games in Q4 2011, with an average 4.5 million of them paying an average RMB 92.8 ($14.50) per month. Shanda has been trying to break outside of China. Licensing its games to portals in Thailand, Indonesia, Russia and Germany brought an 89 percent lift in international sales year-on-year.

Is that a threat to the west’s dominant Zynga and Playfish? Not necessarily. Zynga wants to help Chinese game developers in to America.

Zynga China GM Andy Tian has targeted “leveraging on Zynga’s platform, helping Chinese game developers expand into overseas market” (via TechNode) – more Chinese games are due to launch in the west in the next few months.

Partnership seems like the right approach. Many western companies entering China tend to fail thanks to cultural differences, lack of local business understanding and being shut out by protective authorities.

But Zynga will need to tread carefully, doing partnerships that work both at home and in the Far East, which continues to represent a market ripe for western involvement. Zynga’s top priority is strengthening partnerships with Tencent and Sina Weibo, according to Tian.

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