Fighting to rule the ultimate online kingdom

Updated 2017-07-27 10:49:27 China Daily
Top gaming players from different cities gathered in Wuhan, capital of Hubei province, to play in a League of Legends competition in September 2016.

Top gaming players from different cities gathered in Wuhan, capital of Hubei province, to play in a League of Legends competition in September 2016.

Chinese video game companies are playing for high stakes. As the global gaming market enters an increasingly mobile era, they are being forced to adapt to an industry which is moving toward free-to-play.

One of the latest sector reports by London-based venture capital firm Atomico showed that China surpassed the United States as the gaming capital of the world by revenue last year, topping 1 billion. Up to 38 percent of that revenue came from mobile gaming.

Competition is as fierce as it has ever been and while Chinese mobile game companies fight to stay on top, foreign rivals are trying to muscle in.

Still, one question is on everyone's mind: How to make money on free-to-play games?

"The transition toward the free-to-play monetization model has been absolutely critical," said Tom Wehmeier, principal and head of research at Atomico and author of its report.

Last year, gaming revenue in China reached .6 billion, the highest in the world.

It surpassed the US by 0 million and Europe by .3 billion, according to Atomico's report, Europe Meets China-How The Games Industry Is Evolving.

The country's status as a global games giant is largely due to Tencent Holdings Ltd, the Shenzhen-based creator of WeChat and QQ.

The online group already has a war chest of successful foreign titles such as Riot Games' League of Legends.

Domestically, its multiplayer internet blockbuster production King of Glory, also known as Honor of Kings, is expected to contribute more than 50 percent of Tencent's mobile game revenue this year, according to Bloomberg.

"One thing that is perhaps not understood outside of China is just how much of a rich tradition there is in terms of the local Chinese game developer community," Wehmeier, of Atomico, said. "These guys produce some of the best content in the world."

King of Glory, a free game with online purchases similar to League of Legends, grossed 5 million in April, with projected annual revenue of billion, according to Atomico's report. The game is one of the highest in downloads and revenue on the Apple iOS store, according to App Annie.

Smash hits, such as King of Glory, are the potential rewards for foreign gaming companies who "get it right" in China, according to Wehmeier of Atomico.

"There is no reason why a foreign game (company), given the right partners …couldn't go on to achieve that level of success," Wehmeier said. "The risks are big but the risks can be mitigated given the right approach."

Mobile gaming revenue is all about the small percentage of the global audience paying up to ,000 per month. These are known as "Whales", according to Eylon Aviv, partnership manager for iron-Source, an Israeli mobile app monetization company with offices in Beijing.

Less than 1 percent of mobile players contribute nearly half of the revenue made from all in-game purchases, according to a study by Swrve, a mobile marketing engagement platform.

In other words, game developers have to balance satisfying the small percentage of high-paying users, while monetizing the majority who do not pay.

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