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.

Saturday, September 28, 2013

NTES is going to create a new niche in China's online gaming, the Online Card game, part 2

There are an explosion of new games in China's top two game companies, Tencent and Netease. Just as I wrote an article on Netease's upcoming new online card game, NTES just announced another online card game that is close to come out. One can find my previous article here:

In the last article, I reported that NTES's partner, Blizzard's new online card game, Hearthstone, is really catching fire in the west. I just checked its placement on twitch.tv. Hearthstone was still number 4 at 8pm yesterday (8/25/2013) and is number 5 right now (10 am 8/26/2013). It was an amazing performance, and somewhat unexpected.

That game is coming to China and it is starting to catch a lot of press and starting to catch on among gamer circles.

But it is clear NTES had been worked on this new area more than just being partner with Blizzard. A couple of days ago, NTES had announced that its in-house developed game, XYM, or loosely translated Westward Journey Mini, will be going into public Beta in a few weeks (in October). See the following two articles:

Netease had been dominant in the area of MMORPG (Massive Multiplayer Online Role Playing Game). As a player play a role or a character, gaming company need to create a massive virtual world for player to play in, thus it is the most complicated games. But MMORPG is starting to get saturated. Its growth in China had slowed down drastically.

But in the last few years, it is the other simpler forms of multiplayer online games that are growing. Tencents had captured this market. None of its top three games, League of Legend, Cross Fire, and Dungeon and Fighter, are MMORPG.

Tencent made 1.229 Billion dollars in 2Q2013 from online games. Majority of it comes from 3 games along. I estimate that its top three games along made 60% to 70% of total gaming revenue (about $800M, or about $266M per game). In comparison, NTES got $317 million dollars from gaming operation in 2Q2013. NTES got that $317M from operating about a dozen hit MMORPG games.

In another words, just about any one of the top three games Tencent operates made about as much money as NTES made in all its games combined.

The top three games Tencent has is League of Legend, Cross Fire, and Dungeon and Fighter. League of Legend is a MOBA (Multiplayer Online Battle Arena) game. Cross Fire is FPS (First Person Shooter) game. Dungeon and Fighter is a 2D side-scrolling multiplayer PC beat 'em up game.

In the next year or so, Netease will come out with its own games in each of these three areas. That is the reason I think in the next year or so, there will be a defining moment in the future of China gaming market. There will finally be a true competition between the number 1 and number 2 in all areas of online gaming market in China. But that is for another series of articles that I will write (assuming I have some free time).

Netease is famous for being careful, meticulous. Its products are always to be of high quality. But that also means that it will always being late.

But this is the first time that Netease is able to being the first (among major players) to come out with serious products in a new area.

China's online card game is largely a virgin territory. Tencent did had a online card game. But that game (like a lot of Tencent's self developed games) is of bad quality and flame out quickly.

Netease is going to have two major games in this area. One is licensed from Blizzard and is starting to be the talk of town in China. The other one is a self developed game based on its own number 1 property, Westward Journey.

By being the first to market, of high quality, and highly anticipated, one or both can have excellent chance of becoming major hit.


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