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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.

Friday, April 24, 2009

The date NTES had been waiting for

What gets NTES’s shy CEO so excited?

NTES just got the license for World of Warcraft. that must be the reason that gets him so excited? No.

How about the two other license games in Starcraft 2, and Warcraft 3 as well as the battle.net system? No.

Then it must be NTES’s new portal rejuvenation effort? No.

Maybe it has something to do with its two block-buster games (XYQ and XY2)? No.

Maybe it has something to do with its other existing game (XY3)? No.

How about those eight new major MMORPG games that would be out in the next few quarters?

Maybe he is talking about the rejuvenation of DT? No.

Maybe he is super excited about DT’s sequel, DT2? No.

Maybe he is talking about NTES’s first major 3D game, TX2, that is currently in closed beta? No.

Maybe he is talking about that hot new XY3 derived game, XYW, that already had PCU of greater than 100k and is currently in closed beta? No.

Maybe he is talking about western themed (XYQ-liked) game in new Fly for Fun, FF? No.

Maybe he is talking about that ghost story game, QN? No.

Maybe he is excited about that major 3D turn based XYQ typed game, CSXY? No.

Then he must be talking about that transformer themed game, BB? No.

No, it is none of the above.

So, what gets him so excited?

…………..

My last article on the Wireless Value Added Service (WVAS) in China can be found here:
http://chinese-net-gaming-stock.blogspot.com/2008/03/china-mobile-taking-action-to-stop.html

In the following article, the CEO of NTES talks about 3G.
http://tech.163.com/09/0418/10/5765JP7D00093B2F.html

In it, he think 3G would provide great opportunity to China’s internet industry. It was a general talk and he didn’t specify what exactly NTES will do to take advantage of it. By itself, it wouldn’t be an article to pay much attention to.

But obviously, he alone with the head of Google China and MSN China did a commercial for China Telecom 3G. You can find the commercial in the following video:
http://tech.163.com/09/0415/15/56UU5K6J000915BE.html

The above is the commercial that China Telecom ran correspond to the launch of its 3G service in 120 cities in China.
http://www.interfax.cn/news/9159/

Starting on 4/24/2009, NTES will open the special web site for the mobile phone users. See the following news:
http://tech.163.com/09/0424/00/57KHAIQ1000915BF.html

Right now, NTES provides the news, the emails, mobile search, stock checking, community (forum, commentary), watch NBA, blog, mobile games, and dictionary. NTES has the following web site to provide a demo of what NTES’s mobile 3G services:
http://help.3g.163.com/

Even though companies like SINA and KONG had been working on this for awhile now, but NTES does have something that could kick start this effort. NTES has China’s largest email service. Almost every Chinese internet users have an email account with NTES. NTES could use this advantage to push her mobile 3G services.

Before today, China’s mobile industry is dominated by China Mobile. China’s thousands of Wireless Value Added Service Providers (WVAS) are completed dominated by China Mobile. Worse yet, China Mobile tried to muscle in on the WVAS itself.

China’s 2G services were dominated by simple song fragments, and short messages that has very little barrier to entry.

Therefore, you have an industry where there are thousands of WVAS (who only care about getting rich quick) on one end and a monopoly who wants to get in on the action on the other end. It was an abnormal industry.

Chinese government allows China Mobile to be the issuer of regulation, the enforcer of regulation, the judge to decide who are the offenders, and a competitor who tried to dominate the competition. As a result, the whole industry (WVAS) suffers. There are no innovations and is slowly dying.

But as 3G becomes to heat up, now we have 3 big carriers, China Mobile, China Unicom and China Telecom. In addition, 3G services consist of news stories, and videos. It will become much harder and way too expensive for new guys to compete. The 4 portals (SINA, SOHU, Tencents, and NTES) are naturally suited to provide these new contents.

Eventually, we might be seeing an industry where you have a few dominant MVAS providers (the 4 portals plus a couple of others) together with 3 carriers.

It will be a much healthier industry.

NTES is not a big MVAS player. But China Telecom asked NTES as one of three anchors in its commercial. This may be a precursor of this new industrial arrangement.

In the end, some of the biggest beneficiaries may be the 4 portals.

But ironically, I don’t think Wall Street has any idea of this new development.

Finally, to answer the original question at the beginning of this article, see the following news article:
http://tech.163.com/09/0424/00/57KFRVMO000915BF.html

Let me quote exactly what he said:
“Within 2 to 3 years, 3G will be exceedingly popular in China. It will exceed every other country in the world by a big margin. NTES had been waiting for this date for a long time. We are completely prepared. We had prepared all the products. We had accumulated all the technologies. We had also developed brand new business models.”

He believes that some will become truly gigantic internet-wireless companies that dwarfs today’s internet companies.

Finally, he took a dig at the government. He asked for a better system to foster innovation in this field.

1 comment:

Lord Farkward said...

Hey Henry,

I've sent you an e-mail and am wondering if you've received it. Thanks!

Best,
T

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