Shanda, China’s largest online game operator, announced that it is eliminating subscription fees for Mir 2, Magical Land, and Woool. The move was expected for Mir 2, an older game with a rapidly declining user base. However, Magical Land is a much newer game, and Woool is Shanda’s #1 property.

The company’s focus will shift to driving revenue primarily via in-game purchase of premium content. This applies to most of Shanda’s upcoming titles as well. The change is expected to result in a very signficant earnings shortfall, at least in the short term.

Predictably, Wall Street got spooked. Most analysts are interpreting this as further sign of bruising competition from the likes of WoW. But then, we know that WoW isn’t doing as well as Blizzard hoped in China.

If movie theaters stopped charging admission in the hopes that greater popcorn sales would make up the difference, I’d probably call them nuts. This seems similar, though I don’t discount the potential of in-game purchasing. I just think a dual-revenue model is better.

Oh, I also heard another explanation for these troubles: piracy. Apparently, Chinese MMOG operators might be losing the war against illegal instances of their games. I didn’t think it was possible to effectively pirate an MMOG…

• Press release