The All China Sports Federation recently recognised video gaming as a sanctioned sport. To sporting purists it might sound like heresy, but the first official Chinese electronic gaming competition is scheduled for early 2004, and there is even talk of video gaming becoming an Olympic event.

In China, as in the rest of Asia, these games are serious business. Online gaming, the mutant lovechild of video games and the Internet, is the most popular net application after email for China′s 65 million ‘netizens’. According to a recent China Business Times report, industry revenues grew from RMB 300 million in 2002 to an estimated RMB 1 billion last year. By 2006 online gaming is expected to generate a staggering RMB 8.34 billion.

Perhaps this year can be considered the beginning of the end for single player computer games. Since a large percentage of single player games sold in China are pirated, producing and marketing online games is the only option for a domestic computer game industry that has never really been able to get on its feet. The concept is simple: to play an online game you need to connect to the server – copy as many CDs as you like, but you still cannot play unless you have paid for access.

Recently, to the great excitement of gamers all over the country, Softstar released Fairy Tale Swordsman II (Xian Jian Qi Xia Chuan 2). A limited number of ‘Luxury Edition’ copies were officially priced at RMB 128. However, due to the game’s enormous popularity the cost of securing a genuine copy ‘unofficially’ skyrocketed to around RMB 300.

Real-time opponents and flashy graphics have made playing online computer games a lot more fun than the primitively pixellated and predictable single-player games of the not-so-distant past. There is a deeper, more perverse joy in annihilating your opponent if you know that the online avatar represents a real person sitting at a computer terminal, albeit hundreds, perhaps thousands of miles away.

In the popular fantasy role playing games (RPGs) opponents equip themselves with various magic items and battle it out – often in groups of friends over months at a time – through a scripted adventure, usually to rescue a princess or kill some evil end-of-level baddie. Better games have meant more online players: the China Center of Information Industry Development (CCID) estimates that there were 19 million online gamers in China at the end of 2003. This year the number of users is predicted to explode to 32 million and will continue growing to 48 million by 2005.

The social ramifications of the online gaming boom are already apparent: marriages and companies have dissolved, careers lost and fortunes won – all in cyberspace. In a recent Beijing court case the plaintiff asked to divorce his wife citing her refusal to let him play online games as the reason. Justice was upheld and the court finally demanded that the husband stay away from Internet cafes.

It is not all smooth sailing for the hundred or so domestic gaming companies in the sector either. Lawrence S Tse, a partner with Shanghai based venture capital firm Gobi Partners that invests millions in gaming firms, estimates that by the end of 2003 there were as many as 140 online games in China – up from 60 from last summer. But he also predicts that only a handful of these games will make a profit. Less than half are likely to break even due to high production costs.

The online game industry is all about ACUs (Average Concurrent Users). For a game to break even, it needs approximately 10,000 of them. The most popular game in China at the moment is The Legend of Mir II, run by China’s largest online gaming firm, Shanghai Shanda Networking. The Legend of Mir II has an estimated 250,000 to 300,000 ACUs, attracting some 650,000 simultaneous users during peak times. The firm′s owner, Chen Tianqiao, is listed as China′s second richest IT entrepreneur, with a cool RMB 4 billion in the bank. Meanwhile, China′s ′richest man,′ William Ding of Netease.com, is said to be worth RMB 7 billion. His portal also started making profits thanks to the advent of online gaming and SMS.

Korea has traditionally been the source of many of the most popular traditional fantasy role playing games (RPGs) played in China, including the original version of the Legend of Mir. This strong presence is partly due to the fact that the Korean Government has long recognised the potential of the gaming industry and finances a game development platform. BDA China, in fact, reported that last year a nasty row developed between Shanda and Actoz, the Korean firm that produced the first Legend of Mir, over a pirated version of the game that had leaked out on the net.

Conflicts aside, China is looking to emulate the Korean model. Xinhua reported that online games are now part of China′s national science and technology programme and its makers get tax breaks and other support. “I expect government initiatives similar to Korea′s to emerge in China,” Tse says. Shanghai′s Xuhui District, for instance, has plans for a game development village and rumour has it that one top multinational game company is already planning to move there. Chengdu’s Sichuan University is the first Chinese institution to open a department of game software and the government recently announced that it plans to spend RMB 40 million to develop an online game engine (a kind of programming foundation on which different games can be built). Other government bodies like the Ministry of Culture are expected to follow suit with their own titles. As well as traditional fantasy RPGs, other genres like space and female-oriented games will be developed.

But as with every other hot sector of the economy, there is a very real danger of the online gaming sector overheating. “The industry is indeed bubbling up,” says Tse, adding that a shake-up of massive proportions is around the corner. But when the dust settles, the companies that survive should be in a position to reap equally massive rewards.

Top Online Game Sites

www.sina.com

www.sohu.com

www.netease.com

www.the9.com

www.shanda.com.cn (has English-language site)

www.17173.com

Top Games

China′s first official electronic sports event will feature the games Half Life Counter Strike, Fifa Soccer and Warcraft.

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