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Box of delights
DAI YAN
2005-08-08 06:07
The game industry is buzzing with excitement. Market observers are waiting to see how Chen Tianqiao, chairman and chief executive officer of Shanda, China's biggest online game operator, works his magic with the company's highly anticipated product.
The system, unofficially dubbed the Shanda Box, will provide music downloads, stock quotes, karaoke, news, and weather forecasts. More importantly, it will be able to stream movies and Shanda's popular games.
With the company ready to market the system before the end of this year, Chen, ranked by Forbes last year as the third-richest man in China, says the home entertainment platform will expand its operation capabilities to integrate and support more participants than ever.
The system's blend of marketing and technical support is generating a huge buzz among content providers. The Shanda Box integrates the company's user management capabilities, distribution channels and payment systems to form a gaming package that could revolutionise the industry.
The numbers are impressive. Shanda boasts 460 million registered users and 16 million paid ones. The company uses an innovative payment system with a million users paying with their bank cards. Its call centre employs 500 staff providing round-the-clock service.
Shanda had signed co-operative agreements with 48 leading domestic and foreign content providers by the end of last month. Big names such as Kodak, Vivendi's Universal Music and online auctioneer eBay Inc have signed on, signifying that Shanda is yet another step closer to providing home users with a diversified service portfolio including games, movies, music, online shopping, lifestyle content and online education programmes.
"User demand will drive the integration of software, hardware, content, network and services, which could create an opportunity for the interactive entertainment industry in China to jump forward and become a world-leading innovator," says Chen.
"Shanda's platform is open to all content and service providers who share the same vision as us: to deliver a compelling range of services to millions of Chinese consumers. We are using this platform to explore e-commerce opportunities, boost online game subscriptions and raise advertising revenue."
Chen says Chinese electronics companies missed a golden opportunity when US company Apple released its iPod music players. Chen says Chinese manufacturers were already producing all the elements used in iPods: hard discs, music software and patent protection technology. Unfortunately none of the domestic giants got their act together in time to develop something that could rival Apple's product.
Chinese companies have the technology, content, market demand and capital to excel in the home entertainment industry. Chen says this is an opportunity domestic players cannot afford to miss and Shanda aims to be an innovative consolidator in the industrial chain.
Unlike Microsoft, which marketed its Venus platform as an affordable operating system with basic information processing abilities, Chen says content is the key.
"We must turn our 'cost is king' strategy to 'application is king'," he says.
Analysts believe the retail price of the Shanda Box will be over 2000 yuan (US$247), which is relatively high in the Chinese market and could be a difficult sell for budget conscious Chinese consumers.
But Chen says price is not a big problem.
"Chinese people have the drive to consume. If we develop something valuable, they will buy it," he says, noting a mobile phone priced at 8,000 yuan (US$987) that sells well on the mainland.
Chen has a lot of competition to face. The Sony PlayStation 3, which boasts powerful chips capable of producing movie-quality graphics and complex game environments, is able to stream and download music and movies. Microsoft says its Xbox 360 will act as a hub for all kinds of digital media: movies, music and online content as well as games. The Nintendo Revolution emphasises innovative, networked game play and simple, cost-effective game development over chip power and flashy graphics.
Despite mixed market speculation in the lead-up to the formal launch of Shanda's new platform, the product marks a strategic step in turning Chen's company into an entertainment empire.
Back in 2003 Chen said he hoped to build "China's Disney". With the Shanda Box he is making another move towards turning Shanda into China's version of the Magic Kingdom.
The company's decision to move its content to television makes sense, because Internet user rates are still relatively low in China. There were only 94 million Internet users in China by the end of 2004, compared with more than 300 million households with TV sets and over a billion television viewers.
Shanda is one of the fastest growing companies in China and is listed on the NASDAQ. Chen started the firm in 1999 in Shanghai with only 500,000 yuan (US$60,000). The company booked 1.4 billion yuan (US$170 million) in 2004, which Chen estimates will grow to 3 billion yuan (US$360 million) this year, almost as much as Shanghai Media Group, China's second-largest media company.
The company, which built its popularity on an online game imported from South Korea in 2001, has become one of the most profitable Internet companies in China.
Shanda, however, is already facing potential barriers to further development. Many young Chinese are addicted to online games, provoking a rising number of complaints from parents and drawing negative attention from the Chinese Government.
But for the moment, the company's growth shows no immediate signs of slowing. Over the past two years, Shanda has acquired assets including popular Chinese Internet portal Sina Corp, mobile game developer DigitalRed, literature website Qidian, game website Bianfeng and South Korean game developer Actoz. The company spent all US$450 million of revenue from its listing in April 2004 and a later issuance of convertible bonds in the process.
It also partnered with US entertainment giant Universal Music and the Chinese search engine provider Baidu to licence their music and search engine technology.
(China Daily 08/08/2005 page3) |
