Let's begin with some figures. According to the report, The 2008 Annual Review & Forecast Report on China’s Video Game Industry, China’s 46 million gamers spent $1.7 billion on online games in 2007, up 71 percent from 2006. Advanced casual and casual online games made up 21 percent of the total, and new flash-based casual versions of popular MMO and RTS games demonstrated the hardcore gamers’ appetite to play casual games along with subscription MMOs.
The percentage of casual and advanced casual game revenue is expected to rise slightly each year for the next several years. Online revenue is forecast to reach $2.5 billion in 2008 and $6 billion in 2012, for a 29 percent compound annual growth rate in the five-year period.
"The total Chinese game market is about 15 percent of the total US game market, and gaining fast, and China doesn’t have legal sales of consoles yet," said Lisa Cosmas Hanson, managing partner at Niko Partners. "I think a few years ago it was barely a blip on the radar."
Role-playing games are the most popular MMOs, although there are many racing, sports and dancing games entering the market. According to the new report, 14 million hardcore Chinese gamers play online games more than 22 hours per week. They play online, LAN, and single-player offline PC games in China’s 185,000 Internet cafés and increasingly on their PCs at home, thanks to falling prices.
One reason gaming is growing in China has to do with the migration from cyber cafes to home PCs. Hanson said that in recent years, China’s gamers spent about 50 percent of their gaming time in cafés and 50 percent gaming from home. In 2007 the percentage of time spent in cafés fell, at least in the major cities and urban areas, in favor of spending more time playing games at home. She said this is probably a factor of PC prices falling and broadband penetration rising across China.
"Legitimate sales of packaged offline PC games surged 56 percent in 2007, over 2006," said Hanson. "Chinese gamers are showing that they like to buy the legitimate copies to ensure quality and to get customer support."
With piracy still rampant across the country, game makers have turned to microtransactions to generate revenue - a business model that gives away the game for free. Hanson said that model gained in popularity about two years ago and is now used in the majority of MMO and advanced casual games, as compared with a subscription or time-based model that was popular in previous years.
"This model enables gamers to play for free and then when they get into a game they can opt to pay for virtual items and services that enhance the gaming experience," said Hanson. "It means they feel as though they have a choice in what to pay for, and it attracts more gamers to the market for such MMO and advanced casual games. Even though the games are dubbed as free-to-play, they earn significant revenue."