Asia must localize for global gamers

Several Asian countries have addressed their local games markets well, but the success of their ambition to become games hubs still hinges on how well they can develop the content and interactive game technologies that a broader export market demands.

Greg Unsworth, Asia-Pacific technology industry leader of PricewaterhouseCoopers, said as these countries try to export their interactive games, they face challenges associated with localizing and customizing content, including the need to address language, cultural and consumer preferences for different markets.

"Due to localization requirements, most Asian countries have previously been successful in addressing their domestic video games markets," Unsworth said in an e-mail interview. "With notable exceptions for the console market through Nintendo and Sony in Japan, export markets in mature markets have not been well addressed by Asian countries to date."

Kamlesh Kalwar, an industry analyst at Frost & Sullivan, noted that as faster Internet speeds enhance the overall online experience, users are spending an increasing amount of time online playing games. "The growing broadband penetration has…created an environment conducive to encourage users to spend a greater amount of time online engaging in entertainment activities," Kalwar said in a recent press statement.

According to Unsworth, this extensive broadband adoption and first-mover advantage have established South Korea and Japan as the leading games markets globally.

Japan and South Korea dominate the wireless market largely due to their relatively advanced 3G communication infrastructure and games-centric societies, where their citizens regularly play games on mobile phones and other handheld devices for extended periods of time, he said.

However, Unsworth added that Taiwan is a growing major online market, while India and China are expected to be some of the fastest-growing games markets over the next five years, through to 2012.

Need to differentiate
For other economies with highly developed infrastructures such as Singapore and Hong Kong, how successful they are at developing themselves as game hubs will hinge on their ability to access regional and global markets.

These markets will have to attract and offer incentives to encourage creative talent, as well as stimulate involvement in research and development, and investment in digital media and interactive game industries, Unsworth said.

Success also hinges on the ability of local games companies to customize and localize their content and offerings, to address and appeal to consumer preferences in a broad range of markets, he added.

These companies must also effectively collaborate with other industry players and consumers, to develop and distribute high-quality interactive game experiences that will be adopted by the mass market.

For example, Aroon Tan, president of Games Exchange Alliance (GXA), suggested that Singapore--which has ambitions of becoming a regional games hub--promote itself as a gateway for foreign game developers to Asia. Based in Singapore, GXA aims to help game companies overcome commercialization hurdles and bring game titles to market across Asia.

Tan explained that setting up physical presence in several Asian countries is a challenge for North American and European game companies. However, Singapore's policies provide relatively lower barriers to entry to the country and the region, he told ZDNet Asia.

"Singapore offers lots of incentives, making it an attractive first market to enter the region," he said, adding that at the recent Game Developers Conference (GDC) in San Francisco, exhibitors he met were keen to do business in Asia.

Games driving online content
According to Frost & Sullivan's Asia-Pacific Online Content Services Market report, the region's online content services market continues to see robust growth, thanks to online games.

Revenues for paid online content rose 25.6 percent in 2007 to US$3.9 billion, and are expected to grow by 21 percent this year, reaching a market size of US$4.7 billion by end-2008. The online games segment accounted for as much as 81.3 percent of 2007 revenues, according to the Frost & Sullivan report.

Unsworth does not expect a large degree of collaboration among countries in the region to tap market opportunities.

"Instead, there will be the need to collaborate extensively at the company level," he explained. "As companies race to adapt to changing consumer behavior, emerging technologies and fast-growing markets, collaboration is emerging as a new imperative across content and technologies companies."

The games industry is grappling with a range of emerging business models, a number of which reflect the transition to more free, ad-supported, on-demand and online distribution, he said.

Unsworth noted: "No single company will be able to successfully operate independently over the next five years. The challenges and demand for innovation are too significant."

A revenue model that some game providers have adopted is FTP (free-to-play), where gamers are not charged an upfront fee to play online games. The aim here is to profit through in-game advertising and virtual sale of in-game items such as weapons, ammunition and so on.

Frost & Sullivan's Kalwar said: "In nascent markets, there has been a consistent attempt to increase sampling by giving the base version for free and charging for the advanced versions once the subscriber is hooked." FTP billing models, richer and wider product offerings, and the growing popularity of MMORPG (massively multiplayer online role-playing game) are expected to drive growth in the online gaming segment, he added.