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Rosy outlook for China's mobile games industry

Posted in Mobilizing China by Ori Elraviv on Friday, July 06 2007 01:41 PM

According to a recent article on Chinese portal Sina.com, the Chinese mobile game market is poised for significant recovery in 2007. The article is in Chinese, so that might not help most readers, but here are some interesting highlights:

1. Revenues: The entire market for mobile game downloads with China Mobile has reached RMB 95 million in Q1 2007, that's roughly US$12.5 million. Reports are indicating that the numbers for mobile game downloads in China could grow yearly to RMB 9.5 billion (US$1.24 billion) by 2010.

Take away: The projected figures sound really high to me, especially with so many issues still remaining in the Chinese market, such as illegal downloads, pricing models and billing. On the flip side, the report mentions mobile games to be the focus of China Mobile on 2007, so perhaps we'll see a significant upside this year.

2. In September 2006, the market share of the top 20 Chinese service providers was 60 percent, leaving a long list of other service providers to scramble for the remaining 40 percent.

Take away: Expect to see a significant change in these numbers, and further consolidation of service providers in the industry. China Mobile's goal is to significantly reduce the number of service providers they work with, and reportedly close to 80 percent of the current ones in the market will disappear in the near future. In direct relation to that, the article states a staggering number of 37 percent of Chinese service providers that made ZERO revenues on mobile games during that quarter.

3. The top 3 service providers for China Mobile in terms of revenues for Q1 2007 were: MIG, SINA and CNMOSUN. MIG's market share during this quarter was 10 percent.

Take away: Joining those three service providers at the top of China Mobile's list are Kong Zhong and Moloon.com. Kong Zhong is part of the three service providers that have been awarded a unique status to operate games through China Mobile's premium games channel launched on Monternet in December 2006 (the other two are Sina Mobile and MIG). There is a rumor that Moloon.com will try for an IPO later in 2008, by the way. But I'm not sure if there is room in the market for another Chinese service provider.

4. Aspire-Tech, China Mobile's technology arm which maintains the Monternet site, has finished building the platform for connected games. The new platform is scheduled to be launched in the fourth quarter of this year.

Take away: China Mobile has apparently invested quite a lot of resources in restructuring their mobile games platform. The notorious Magic Box platform (MBox) has just recently been reopened after more than nine months of restructuring, which blocked all submissions for new games through the channel. China Mobile has also opened a special channel for Symbian games, and as mentioned above has opened a special channel for premium games. That said, it appears that China Mobile pulls heavy weight on the connected games platform. With the phenomenon of illegal game downloads from free WAP sites getting worse (an industry source recently told me the prisons are currently occupied by those who dare to sell porn on mobile, so there's not much room for those who infringe on intellectual property rights or sell stolen content), the market for online mobile games are significantly more challenging to disrupt. A business model for those connected games still needs to be addressed, as high overall fees are still hampering the growth of this sector.