Chinese Game Revenues Jump 52% in 2005

Via Next Gen, a report that 26M subscribers spent $470M on online video games in China. That’s 52% more revenue than in 2004.

It’s interesting that despite this increase, Chinese online game operators recently reported disappointing financial results. What explains the discrepancy?

I’ve heard whispers that piracy is beginning to hurt even the online game operators, but I’ve read nothing conclusive (in fact, I’ve read the contrary). The Chinese government recently ordered curbs on the number of hours consumers can play per day, but nevertheless, revenues rose. Furthermore, the government isn’t solely playing bad-cop; it is actively supporting the game industry all the while. And the Internet infrastructure is rapidly being improved in China, so the problem can’t be rooted in bottlenecks there.

So what’s up? Given the (known) facts, I think that there must simply be too many companies making too many of the same kind of game. As a whole, they make a ton of money, but individually, they are suffering from the competition. Perhaps the West cannot lay sole claim to the ever-prominent issue of “innovation scarcity”…

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