About this Blog

The purpose of this blog is for my personal use. It serves as my personal diary as I investigate Chinese internet/gaming companies for investment purpose. If you have any comments or disagreement, please give me feedbacks.

Tuesday, September 30, 2008

China's Goldilocks Economy

Did China just achieved Goldilocks economy?

I am no economist. But two recent news make me wonder that China's economy had achieved (or is not its way to achieve) soft landing.

After bedeviled by high inflation, inflation in China had declined for 4 straight months.

After three straight months of declining manufacturing activities, the Purchasing Managers' Index just rose to a seasonally adjusted 51.2 in September from 48.4 in August.

Because of the global (near) recession, cost of the raw material decreased and that helps with China's inflation problem.

Because China has so much money (trade surpluses, etc.), it is able to invest (into infrastructure) its way out of any economy decline.

I think China is on her way to change from a export economy (like Japan) to a continental economy (like USA).

What do you guys think?

Wednesday, September 24, 2008

NTES XYW status – Closed Beta

My last article on XYW can be found here:

From the following article, XYW,

XYW will start the 2nd closed beta on 9/25/2008. This closed beta is open to the public. In addition, the player characters are going to be permanent. Basically, this 2nd beta test will fit all the definition of an open beta testing.

If they want, they could start to charge money on 9/25/2008. NTES did some minor marketing for this closed beta.

In addition, from what I reported before, TX2 had its final closed beta on yesterday, 9/24/2008. There is a little marketing for that game also.

It surprises me that NTES had those two games out for the closed beta so close to each other. But those two games are in different categories. XYW is a cartoonish turn based free to play game, while TX2 is a 3d real time free to play game.

It is going to be difficult to tell when the commercialization of a game starts. For all practical purpose, TX2 had already started charging players for items starting 6/6/2008. NTES will most likely start to charge for items for the XYW soon.

After XYW, FF2 shall be out by the end of this year. After that, the new game DT2 shall be ready soon afterward. That game will probably be ready by the 1st quarter or 2nd quarter 2009. In addition, there are also the licensed game the two Warcraft games as well as the Starcraft 2 game. All of these games will probably be ready in 2009.

The next 3 quarters are going to be extremely busy for NTES.

Tuesday, September 23, 2008

NTES – FF2 status part2 – Open Beta

Part 1 of this article on FF2 can be found here:

From the last article, it is clear that FF2 is ready by 9/9/2008. But the exact schedule will be determined by upper management for marketing reason.

NTES released another article a couple of weeks later:

From the above article, NTES set two firm dates for FF2. On 10/15/2008, FF2 will start the players’ migration from the FF1 to FF2. The official open beta will come after that.

From my previous status updates on the NTES’s games, TX2 will have official Closed Beta on 9/24/2008. XYQ and XY3 will have major expansion pact out on October and November time frame. My best guess is that FF2 will go into commercial operation (Open Beta) in late November or early December 2008.

Monday, September 22, 2008

NTES – FF2 status part1 - Game development finished by 9/9/2008

My last post on FF2 can be found here:

There are significant developments for this nice new game NTES is developing. This development also illustrated the jekell and hyde personality of NTES the company.

On 8/13/2008, NTES had the 2Q earning conference. In it, it provided virtually zero information to the Wall Street analysts.

A week later, on 8/20/2008, FF2’s lead designer spent a whole day on FF2 official forum to answer players’ questions. It provided extremely detailed answers on the game design, play features, and schedule of FF2.

This is actually rather typical for NTES. The amount of details NTES’s game designers gave to game players is extraordinarily thorough and is definitely much more meticulous than other game companies.

FF2’s lead designer written the following 5 threads (be warned, it will be a very long read):

The amount of information included in the above links is extraordinary. In addition to the wealth of information on the design philosophy and game playing features, the lead designer also has a firm date of 9/9/2008 for when his design team will finish the development. He however has no idea when the actual open beta will be. NTES may have other (marketing related) consideration that will impact the schedule of FF2’s open beta date.

A Korean company originally developed Fly for Fun. At the beginning, it was really just an advanced casual game.

NTES purchased the right to the software source code as well as the right to modify its software programming. NTES spent quite a few years completely re-worked this game from the ground up. They even completely re-do the underlining game engine.

From the above links, it is clear that this version of FF2 is completely different than the one outside of China (the original FF1 game).

Rather than an advanced casual game, FF2 had been completely morphed into a full fledged MMORPG game.

Like TX2, it is a 3D game. Like XYQ, it is a Q-style game. But unlike all other Netease games, it is purely a western style game. It is also a real time game. It will be a free to play game. Therefore, FF2 will occupy an unique place (all Netease games have traditional Chinese themes).

No Wall Street analysts had even mentioned this game at all. Maybe they didn’t realize that NTES had converted this game into a full-fledged MMORPG game. I will go against the grain; I will predict that FF2 will be a very successful game (in terms of contributing to the revenue mix).

Again, this is another perfect example that NTES just won’t provide any information to the Wall Street analysts.

NTES - XY3 status – new expansion pact

My last article on XY3 can be found here:

According to the following article, XY3’s new expansion pact will be out somewhere around October, November time frame

From the above article, there will be two major parts and multiple smaller parts comprised of the expansion pact. Out of the two major parts, the first part will be out in early to middle October and the second part will be out in November.

The official web site for this expansion pact can be found here:

This will be the first expansion pact since XY3 goes into commercial operation on 9/12/2007.

This is going to be an extremely important expansion pact for XY3. After struggling for the first two quarters, XY3 had started to stabilize. Actually, it had started to grow again. It actually achieved a new PCU of greater than 170k on 8/15/2008.

For the first 6 months of its operation, there is great doubt on the success of XY3. But XY3 caught a second wind and start to behave like it will grow into a major title. I think this expansion pact will confirm whether XY3 has legs.

If XY3 turns out to be a success, I believe it will then be the only paying game that will find success in China in the last two years. It will be extremely significant. It will indicate that there are still markets for new paying games (as opposed to free-to-play games) in China.

Thursday, September 11, 2008

NTES - TX2 status part 2 – Official Closed Beta on 9/24/2008

Part 1 of this article can be found here:

I had been quite critical of NTES’s management in their lack of marketing for TX2. From the way the game is played and the way it is received by the players, it is obvious that NTES has a potential mega-hit in TX2. But I thought with the lack of marketing for TX2, NTES could ruin a great game.

Well, I might be way too harsh on NTES. It is probably not a good idea to go against NTES on how a game is developed and is ran.

From the following article:
and from the official web site of TX2:

NTES is going to set 9/24/2008 as the date for the “Official Closed Beta” for TX2. They are going to opens up multiple game servers for the Official Closed Beta.

TX2 had been in commercial operation since 6/6/2008. But they never had a formal major marketing campaign to announce their “grand opening”. TX2 was supposed to be the next major project for NTES and I thought it is crazy for NTES to start commercial operation of TX2 without any major marketing campaign.

Well, it turns out there might be good rationale behind it.

Even though there were no mass of players playing TX2 on 6/6/2008. Unlike other games with massive marketing campaign and has a couple of hundreds of thousands of players within the first 2 weeks, TX2 never have that.

But it is building momentum continuously. It had slowly building so that it has 25 servers now. That would probably translate to a PCU of about 80k to 90k players. Unlike most other games that fade quickly after a few months, TX2 is actually getting stronger and stronger.

In addition, because it is only closed beta, there are still opportunities for NTES to do marketing if it is needed.

The jury is still out. But TX2 is starting to act more like a major hit that has long legs.

Wednesday, September 10, 2008

NTES - TX2 status part 1 – 1st expansion pact

My last article on TX2 can be found here:

Starting September 2008, NTES had started to release TX2’s first expansion pact. See the following site on the contents of the expansion pact:

This expansion pact is going to be released in three stages. Each stage will consist of about 3 to 4 major new functions. The first stage will be released on late August 2008. Out of three major functions, its most important function is the new battlefield playing feature will be released. In addition, multiple fighting-specific servers will be opened. Features emphasize fighting will force players to upgrade their equipment (swords, shield, elixir, etc). Those equipments cost money to purchase.

The second stage will be released in late September. Out of four major new features, the most important will be the maximum player level will be increased from 60 to 70. Of course, there will be new (more powerful) equipments that will come with the higher level. For example, a 70 level player with 40-level equipment will probably lose to a 50-level player with 70-level equipment.

The third stage of the expansion pact will only have one major feature. But boy, is that an important feature. It will be the signature feature of TX2. The castle siege feature will be released. This is scheduled to occur on October.

When NTES fired the old head designer of TX2 on 4/30/2007, I was actually happy they did that. I never thought the old TX2 could be a mega-hit. I never thought a paying game centered on castle siege can be a mega-hit.

Now after NTES revamped TX2 completely, TX2 becomes a free-to-play game. Castle siege will be absolutely ideal for a free-to-play game.

The new TX2 is now much more friendly to single player (players who are not part of a clan), but at its core, it is still going to be a game dominated by the clans. And Castle siege will be the singular calling card for TX2.

I regard the difference between paying game and free-to-play game as the difference between Communism and Capitalism. In the paying game, everybody is the same (just like Communism). Even if a player wants to spend more money, he can’t in the paying game because the cost is fixed (for old TX2, the cost is fixed at 0.4 RMB per hour). But in the free-to-play game, there is no limit on how much a player can spend.

In a normal free-to-play game, most players spend money on his character. But there is only so much one can spend to make his character powerful. Of course, TX2 also has pets/mounts/rides. That is another area the players can spend money on.

But to get big money from the super rich, TX2 will have to get the player to spend money not on himself but on his clan. The big money will be made on players who are willing to spend for the clan (that have thousands of members). This is where castle siege comes in.

TX can be translated as “under heaven”, “kingdom”, or “empire”. Just the name of the game will tell you that it is a global domination game. The game starts out with no empire or kingdoms. These clans are the kingdoms. To become the singular empire under heaven, the clans have to fight it out among themselves. There are multiple castles in each server. The clans will be fighting it out for these castles.

TX2 will be a game that will be completely unscripted. The game designers don’t control the story. The game players (clans) determine the story of the game.

One clan has to forcibly take the castle from another clan. When a clan takes over a castle, it also takes over the shops in the castle. It also needs to defend the castle. The castle needs to be fortified. The gate needs to be thickened. Specialized weapon need to be made. Those upgrades require special trade smith (carpenters, steel smith, etc.). It therefore keeps clans members busy. In addition to labor, these upgrades also require raw materials. Those raw materials will need to be purchased.

As clans starts to expand, specialty castle siege weapons need to be build. Again, those require labor from the clan members and money for the raw materials. Therefore, a successful clan leader needs to be both charismatic as well as rich. He also has to be willing to spend.

TX2, with castle siege at its core, will be a game that will satisfy both NTES and the super rich players. NTES gets to have those super rich players open their wallets. For the super rich players, they get to experience true power thru the game. They get to have thousands of clan members under their control. For the clan members, they get to experience camaraderie as well as be part of something bigger than they are. They get to shape the destiny of the future of the game. For non-clan players, they get to experience the life of a lone kung fu master during a war ravaged time.

And the best part is that nobody knows how the future holds. Game designers don’t control the story. Everybody have influence on the future of the game, but nobody determines it.

TX2 will be an intoxicating game to play. That will make it into a very popular game. More importantly, TX2 will be a game that attract rich players and help them to spend their money.

Tuesday, September 9, 2008

NTES - XYQ status - expansion pack in October

My last XYQ article can be found here:

I am not quite sure most people know the accomplishment of XYQ. It is the most popular MMORPG in the world, not just in China. Better yet, it is still growing and having no signs of slowing down at all. For example, it achieved a PCU record of 2.08 million players on 4/27/2008. Then four months later, it achieved a PCU record of 2.32 million players on 8/3/2008.

More impressively, NTES is able to grow paying games such as XYQ, XY2 as well as start another in XY3 while all of China had converted to free-to-play games.

It is clear paying games are here to stay in China. Actually, as all the games going the free-to-play route, paying games like XYQ, XY2 and XY3 as well as NCTY’s WOW (World of Warcraft) benefits as many Chinese players started to get tired of the severely player un-balance that are un-avoidable in the free-to-play games.

From my server monitoring, XYQ had been very strong so far. But it is time for XYQ to get an update. The last expansion pact was released on 9/25/2007. There had not being any major update to XYQ for one year.

From the following article:

A new expansion pact will be out on October 2008. This will be the eighth expansion pact for XYQ. It will be the first major update to the game from more than one year ago.

In keeping with NTES’s tradition, they are not going to be bothered to give this information to the Wall Street.

Anyway, this new expansion pact will be very helpful to NTES’s revenue growth for the 4th quarter 2008 and 1st quarter 2009.

Monday, September 8, 2008

NTES – XY2 status – expansion pact out on 8/28/2008

My last post on XY2 can be found here:

I had been following NTES for quite a few years now. I had never seen so many activities for NTES’s games. Every major NTES games have some significant activities in the next couple of months. I am going to spend the following 4 or 5 days to go through every one of them.

The following is another example of NTES’s aversion to the Wall Street analysts. On 8/13/2008, NTES had its 2nd quarter earning conference call. It didn’t bother to tell the wall street analysts that XY2’s next expansion pact will be out on 8/28/2008 (even though one wall street analyst had specifically asked for detailed schedule for the expansion pacts). See the following link:

Unlike most other Chinese companies where they would come out with expansion pacts once every quarter, NTES’s expansion pacts are much more extensive. This is the first expansion pact for XY2 for about one year. Every other company would have proudly pronounced it in the earning conference, but not NTES.

XY2 had just broken a new PCU record on 6/1/2008. From my server checking, it had been very strong lately. After the new expansion pact is released, it will be even stronger. The full effect of this expansion pact will be evident in the 4Q2008. I can’t wait for the 4th quarter earning conference.

Sunday, September 7, 2008

Status on Sohu’s next two games

My last post on the status of Sohu's games can be found here:

Sohu's next major game, LDJ, will enter first closed beta on 9/17/2008. See the following news:

Sohu had also opened the official game site:

I don't think Sohu will get LDJ out this year. I am guessing that we shall see the game becoming commercial in either 1Q or 2Q 2009.

In addition, there is news that Sohu will license and operate another title, JianXian. Please see the following news:

Sohu will start internal beta for this game at the end of September 2008. This game shall be in commercial operation in 2009.

In the 2Q2008 earning conference call, Sohu called LDJ as "The Duke of Mount Deer" and JianXian as "Legned of Ancient War".


A test for now