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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.

Sunday, June 7, 2009

NTES’s New Games – part 1 - The next mega hit: the New FF

One can find my last article on the new FF here:

There is a lack of new major hits in China’s gaming market in the last couple of years. All in a sudden, we might have two new ones hitting the market in the last two months. The first major hit is going to be SNDA’s AION. The second major hit is probably going to be NTES’s new FF.

AION’s success is probably not a surprise. A lot of Wall Street analysts had predicted. But nobody had given NTES’s new FF any look. Do people even know it exists? Do people know that new FF went into open beta less than one month ago (on May 15, 2009).

As many of you have requested, I am going to review all the new major games development in NTES. I am going to start by reviewing the most exciting new game, the new Fly for Fun (FF).

I had been following the new FF since February 2007. See the following link:

I had always intrigued by the potential of this game. By 2 years ago, I think this game might pull in 5 to 10 Millions per quarter:

Two weeks ago, I thought this game has all the hallmark of major hit written all over it:

Now, I am ready to make my prediction. If one defines a mega hit as a game that achieves a PCU (Peak Concurrent Users) of more than 500 thousands, I predict the new FF will definitely achieve that milestone. In addition, I predicted that it will break though 500k in less than one year and will keep on growing.

There were lacks of major hits in China in the last couple of years. The condition is ripe in China for a few new major hits in the coming couple of years. I think two recent games will reach the major hits status (PCU > 500k). SNDA’s AION will get to that point a lot faster. A really successful marketing effort by SNDA and the severe disruption of its major competitor (NCTY’s WOW is closing down) will allow AION to reach that status by some times this summer. But as I suggested in my last article on AION, there will be limits to its growth.

I think NTES’s new FF will be the other major hit. There was virtually zero marketing effort by NTES for new FF. There was virtually no growth the date of open beta. But as times goes on, NTES becomes adding servers after servers. The growth is getting stronger as time goes on. It probably won’t get to the major hit status until later this year or early next year. But there is nothing to keep it from growing after that.

I believe, in two years, new FF will outperform AION.

Now, I am going to give the background information on this game. A Korean company named Aeonsoft made Fly for Fun. On July 2004, NTES licensed this game from that Korean company. On December 2004, FF went into open beta. Back in 2004, all games are paying games (time-based), open beta doesn’t mean commercialization.

But NTES is not satisfied with the game. They purchased the source code of the game. They also purchased the right to completely rewrite the game from the ground up. And they did just that.

Any other companies (either Chinese or western) would have closed the game down. But NTES kept the game going. Unlike today where open beta for today’s free-to-play (item based) games just mean commercialization. Back then, open beta means free. For four years, the players play this game completely free of charge.

NTES felt the game is lacking of features. These features can’t be added because its underlining game engine is too limiting. From December/2004 to June/2005, NTES tries to fix the game engine. By June of 2005, it determined that the software rewrites are too extensive and the game engine is not salvageable.

From June 2005 to July 2006, NTES rewrote the game engine and build one from the ground up. On July 2006, NTES did something really unheard of. It splits its development team into two teams. One will develop the new FF while another one will write an expansion pact for the old FF. Considering that players are completely playing for free, it is unheard of in either China or other places that a game company would devote significant resource to support its game players without any monetary reward.

The expansion pact will use the brand new game engine but will reuse all the graphics and the play features. The expansion pact will provides about 50% more playing features than the old FF. It is completed by April 2007 and FF players had been playing it until the arrival of the new FF.

Again, this is complete free to the players. There are no in-game items to buy. There is no time-based game card to buy. Anybody can play this game completely free. The fact that Netease is willing to do this for the players says much about Netease as a company.

As an investor, I don't know if I shall be laughing or crying. To an investor, this is just money down the drain. But to the ordinary players, Netease is doing something no just unheard of in China, but to the rest of the world also.

That expansion pact was a dead end. The other members of the development team concentrated on the new FF. By May 15, 2009, the game is finally finished and it went into open beta.

The new FF toke five years to develop. This is another trademark for NTES. Most companies in China popping out games like Ford mass produce cars. Companies like Perfect World can have 8 or 9 games in one year, or a company like SNDA that can convert all its games from time-based to item-based in 6 months, nimbleness are their forte. But most of their self-developed games are of lower qualities.

NTES is on another extreme. At the end of 2005, all game companies in China are converting their games from time-based to item-based (free-to-play). Companies like SNDA spent 6 months to convert all its games. NTES stopped development on all its new games. All new games developments are starting over from the ground up to meet the new requirement change. For more than 3 years (from end of 2005 to May 2009), NTES made only one new item-based game, TX2.

NTES is a company of extremes. It has great trouble when there is a major change in industry trend. On the other hand, all games it produces are of the highest quality.

Now I provided the background of new FF. In the next article, I will describe the new FF in more detail.


Anonymous said...

Thanks for posting your thoughts - have you followed Warhammer?

HenryC said...

Warhammer is doing badly in the west.

Anything can happen, but it is a little hard to see it hit big in China when it can't even do well in its home market.


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