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Some parts of Asia, most notably Japan and Korea, have seen huge domestic success for their gaming industries. In 2003, the Korean games market was worth US$700 million—just six months later, it raked in another US$500 million in revenues.
Despite the region’s success, however, the international market is still dominated by games companies from Europe and North America. So the question today is whether Asian software houses will be able to break into this global market, bringing original intellectual property (IP) to the table rather than just being a source of cheap labor for foreign companies.
The recent GameSphere conference organized by Asia Events explored some of the issues facing the Asian games industry as a whole.
Be original
Trent Smith, director of Asia-Pacific Research & Positioning (APRP) felt that Asia needed to move away from outsourcing and toward developing local IP that can be sold internationally. APRP is a consulting firm that specializes in the new media and telecom-munications market segments.
He referred to last month’s announcement by Lucasfilm to establish Lucasfilm Animation Singapore. The digital animation studio produces digital animated content, including films, television and games for global audiences. Smith noted this is both good and bad for local digital IP creation.
“The Lucas deal is huge for Singapore, but it could end up being at the expense of indigenous talent in that Singapore will become a place for outsourcing and off-shore development rather than local IP development.”
But on a more positive note, he added that Asian developers can form partnerships with companies in North America to the benefit of both parties. However he did point out inherent problems with the creative side of the business in Asia: “The Asia-Pacific region lacks depth and direction. As a general rule here, technical expertise has been valued at the expense of asset creation.”
For Robin Tan, managing director of Envisage Reality, this is an everyday problem.
The Singapore-owned game developer is in the final stages of developing a game demo to be showcased to games publishers. If all goes well, Immortals: The heavenly sage will be a game based on Chinese mythology and legend, featuring realistic Gong-Fu moves and graphics, playable on the PC and Microsoft’s Xbox game console.
However, things are not so simple.
Tan said: “We face two major problems. Firstly funding: the Asian economic situation is still not as good as it could be, and in Asia, games are not seen as a business but as a toy. Venture capitalists and the likes only look at the size of the local market, not at the potential of the international market.
“Secondly, there is the problem of getting talent locally. Because games have not been a real business here, much of the good local talent has been exported.”
Furthermore, the volume of funds needed for game development is becoming larger and can even rival amounts typically used to produce smaller Hollywood films—making it tougher for game houses, such as Envisage Reality, to get the budgets they need.
To reach the final stage of development and have its game published, Tan will need to secure S$6 million (US$3.5 million) in funding over the next two to three years. The firm was fortunate enough to receive S$100,000 (US$58,560) in seed money from the MDA, but Tan now faces the uphill task of persuading investors his game has what it takes to succeed in an extremely competitive market.
Facing piracy
Another specter that haunts all software development in this region is piracy. With some countries in Asia seeing an estimated software piracy rate of over 90 percent, it is perhaps not surprising that investors are cautious when it comes to supporting software projects.
The Internet is proving to be both a blessing and a curse for games companies. On one side, the Web has enabled pirates to easily distribute illegal copies of the games.
A recent example points to id Software’s latest game blockbuster Doom 3, which saw an estimated 50,000 copies downloaded on peer-to-peer networks over the weekend prior to its official release in the shops. This translated to US$2.7 million in lost revenue, assuming those who downloaded the game had otherwise bought it through legal channels.
At the same time, online gaming is also seen as a useful tool to fight piracy. Online game players are typically required to own a legitimately obtained disc, and given unique user ID and password keys before they can log in. So gamers who use pirated discs can be detected and denied access, or otherwise, be identified as illegal users when they log in at the same time as legitimate gamers who hold the corresponding password keys.
Microsoft’s Xbox Live service, for example, blocks consoles that have been modified to play pirated games. Increasingly, companies are looking to the Internet as a distribution channel.
As Smith highlighted, “there will always be piracy, but offering online delivery and play is a way to beat it”.
Online delivery is also touted as a way for Asian game developers to reach a wider global audience without incurring costs normally associated with competing in the global market.
Certainly this model has proved successful elsewhere. Speaking at GameSphere, Boonty Asia CEO Cyrille Even, noted: “Buying online is seeing good growth in Europe so I would expect Asia to be even better.” Paris-based Boonty develops Web-enabled platforms which incorporate IP rights, payment and clearing management for companies such as Web portals and game publishers, to offer paid, downloadable video games.
Meanwhile, Java games are starting to enjoy a growing interest as more and more people play games on their phones and other mobile devices. A recent poll conducted by CNET Networks Asia Pacific, through its GameSpotAsia Web site, found that 46 percent of respondents play Java games.
PROBLEMS BREW FOR JAVA
WHILE Java games are cheaper to develop than the bigger game projects, this segment of the industry faces its own problems.
A key challenge for Asian companies in this sphere is the costs associated with getting the telecoms operators to include third-party games in their library. While a mobile game may cost less to create, it sells for much less—S$6 (US$3.51) in Singapore, for instance—than a PC game which typically sells for S$50 to S$60 (US$29.29 to US$35.13) each. The mobile operator will take between 30 and 35 percent of the price.
Brian Tiong, director of full services Asia, Mobileway Asia Pacific, estimated that an average Java game developer may need to sell 26,000 games per annum before it can break even. And this, in an incredibly competitive market.
On top of that, Tiong added, operator payment cycles are “very bad”. “You might have to wait anything between 45 and 180 days before you see the returns from sale of your games.”
Play video
Why should telcos be getting 30 to 35%?
Imho they should be getting 5 to 8%.
This is a case of reaping off the rewards of others who put in the hard work. Put another way, will the telcos be getting that % if there were no games.
Solution: provide another avenue to download games at a cheaper price, at the same time, throw in the 30 to 35% for telco downloads. Then we sit back and see which direction the crowd will move.
Posted by Varghese on Monday, September 13 2004 07:24 PM