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The China Angle: The9 Expands, Returns For Shanda

The China Angle: The9 Expands, Returns For Shanda

February 12, 2007 | By Shang Koo

The latest edition of Gamasutra's regular 'The China Angle' column sees major Chinese operators The9 and hoping to end its "one game company" stigma with the addition of MMOFPS Huxley, and Shanda seeing major investment returns from casual portal Sina.

The9 Adds To MMO Portfolio

Mainland China's World of Warcraft (WoW) operator The9 continues to beef up its game pipeline. The9 announced on Monday that it has licensed MMOFPS Huxley from Korean online game developer Webzen. The announcement comes a few days before The9 (Nasdaq: NCTY) announces fourth quarter 2006 earnings and a month after The9 announced its licensing deal with Gravity for MMORPG Ragnarok Online 2 (RO2).

The9 currently receives 99 percent of its revenues from WoW, and is anxious to lose its "one game company" stigma. Currently, The9 has NCsoft's Guild Wars in open beta testing and Webzen's Soul of The Ultimate Nation (SUN) in closed beta testing. Huxley and RO2 add to a strong pipeline that also includes Flagship Studio's Hellgate: London. Hellgate: London is an FPS game as well, giving The9 two chances to break into China's FPS market.

Ever since Sony's PlanetSide stopped operation in China in August 2006, China has had no MMOFPS games in commercial operation. After seven years, CounterStrike continues to have a monopoly on China's FPS market. However, the competitive environment may soon change as two companies get ready to release licensed MMOFPS games from Korea. China Cyber Port (CCP), who also owns the China publishing license to CounterStrike, is set to launch open beta testing of Sudden Attack. CDC Corporation, the operator of popular MMORPG Yulgang, has licensed Special Forces. The two games have replaced CounterStrike as the most popular FPS in Korea. If these two games can break CounterStrike's stranglehold on China's FPS market, The9's two games may have a future.

Last week, The9 settled the biggest uncertainty about the company's future development when it announced that it finally had a definitive agreement for WoW's expansion The Burning Crusade. The9 and WoW's developer Blizzard Entertainment had been arguing over the license to the expansion for nearly a year. The two companies' quarrel became public when Blizzard released an ambiguous announcement concerning The Burning Crusade in April 2006. While The9 and most investors thought the company already had the rights to the expansion when it signed the licensing contract in 2004, Blizzard's announcement in 2006 asked The9 to negotiate for the rights to the expansion.

Shanda Investments

Chinese online game operator Shanda Entertainment received 40 percent returns from its investment in Chinese portal Sina this month, when it sold 4 million shares for US$129.6 million. Shanda bought a 19.5 percent stake (around 9 million shares) on the open market in Sina in early 2005, but the takeover attempt fell through when Shanda ran out of money and Sina implemented a poison pill defense. Shanda balked on Sina's proposed price early in the negotiations and was never in a strong position again as its stocks tumbled later that year. Shanda claims it will launch ten new games in 2007, as the additional cash from its Sina share sales allow it to license new games and acquire promising game developers.

Shanda benefited from another investment in February when it licensed 2D simple MMORPG LaTale from Korean online game developer Actoz Soft. Shanda acquired a 29 percent controlling stake in Actoz in November 2005 for US$91.7 million. Actoz developed MMORPG Legend of Mir 2, Shanda's bread and butter game at the time. LaTale is the first Actoz game licensed by Shanda since the stake acquisition in 2005. The game started commercial operation in Korea in July 2006 and should start closed beta testing in China this month.

[Shang Koo is an editor at Shanghai-based Pacific Epoch, and oversees research and daily news content on China's new media industries, with a concentration in online games. Pacific Epoch itself provides investment and trade news and publishes a number of subscription products regarding the Chinese technology market. Readers wanting to contact him can e-mail [email protected].]

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