February 2, 2009 / 11:35 PM / 10 years ago

Recession to help online games firms push West

SEOUL/SAN FRANCISCO (Reuters) - As recession ripples around the world, Asian online games firms hope those seeking cheap entertainment, many of them newly jobless and with time on their hands, will drive a long-sought expansion into Western markets.

A customer walks past gaming memorabilia after receiving his copy of "Wrath of the Lich King", which is launched in Singapore in this file photo from November 14, 2008. REUTERS/Alywin Chew

Online games, which allow thousands of players to compete simultaneously over the Internet, are a dominant form of video gaming in China, South Korea and other parts of Asia.

Blockbusters such as ‘World of Warcraft (WOW)’ by Blizzard Entertainment, a unit of France’s Vivendi, and the ‘Lineage’ series from South Korea’s NCSoft have attracted millions of users across the region.

Analysts estimate the online game market at about a fifth of the size of the video console game market. Total PC game revenue is expected to reach $19 billion by 2013, according to entertainment industry research DFC Intelligence.

Easy broadband access and a game culture built around cyber cafes helped gaming on PCs prosper in Asia. In North America and Europe, however, Web-based games have failed to duplicate their Asian success, largely due to lower broadband penetration and cultural differences.

Now the spreading economic downturn could do what years of marketing couldn’t, developers and publishers said.

“During economic downturns, people will look for the highest return on their entertainment dollar. Online games provide an immersive virtual world for people to escape the daily struggles,” said Lan Hoang, CEO of Aeria Games & Entertainment, which offers Asian games in the U.S. and European markets.

Many online games are offered free, generating revenue from micro-transactions such as character customization and game enhancement. Others charge monthly fees of around $20.

Analysts say online games are not only recession-proof but can even get a boost from an economic slump, because people stay longer at home and have more time on their hands to play.

The so-called “massively multiplayer online role-playing game (MMORPG)” typically takes months of extensive time investment, as a user — say, a warrior or sorcerer in the fantasy world — builds skills and takes on adversaries in a series of missions.

Online gamers’ profiles are different from buyers of Nintendo’s Wii consoles or DS handheld players, which have proved a roaring success with easy-to-play games for a broader population.

“I don’t think (online multiplayer games) get impacted at all, because people who play them are addicts,” said Michael Pachter, an analyst at Wedbush Morgan. “Losing their jobs makes them more likely to play because they have more time to play.”

“These days more people stay late in the evening playing games,” said Jung, a manager at a crowded Web cafe in downtown Seoul. “I think they don’t have other places to go.”

In South Korea, online gaming quickly spread to become a social phenomenon in the early 2000s in the aftermath of the Asian financial crisis, which left many young men unemployed.


Brightening the prospect for online games in the West is the rapid growth of broadband, a prerequisite for the service.

Gartner expects U.S. broadband penetration to swell to 77 percent of households by 2012 from 54 percent in 2007. The numbers could also jump to around 70 percent from about 50 percent in France, Britain and Spain.

“Internet is a must while game consoles are just an option. If you have Internet access, then why not play some games?” said Shim Jun-bo, an analyst at HI Investment Securities.

The recent success of Web communities in the United States, such as MySpace, is also encouraging. Game communities, where gamers get together to find clan members, exchange information and share feedback, play a critical role in retaining users.

U.S. game sites such as pogo.com, as well as the subscription games such as “WOW” are already seeing robust traffic, said Colin Sebastian, an analyst at Lazard Capital Markets.

“We think it’s a robust growth category in terms of video games and Internet media,” he said.

Now Asian developers are launching new games with more globally appealing themes and enhanced graphics, targeting a broader user base. They are also diversifying game genres to include sports, shooting, dance and other casual games.

NCSoft aims to introduce new MMORPG game ‘Aion’, which boasts detailed 3D graphics and took $17 million to develop, in North America and Europe this year after a local launch in November.

Neowiz Games, partly owned by video game giant Electronic Arts, will offer baseball game ‘Slugger’ in North America after modifying contents to reflect U.S. leagues.

Editing by Keiron Henderson & Ian Geoghegan

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