"Chinese online game operators introduced free-to-play massively multiplayer games that are, in fact, not at all free, because gamers spend money on virtual items and services in the game. These free-to-play games helped the market size rise beyond expectations in 2006," said Lisa Cosmas Hanson, managing partner of Niko Partners. "In addition, the country added 3.4 million total gamers in 2006 and now boasts 37.5 million gamers, 90% of whom play online games. By 2011 this number is expected to swell to 71.9 million."
The report accounted for approximately 20 million PCs in China's 225,000 Internet cafes, which make it possible for gamers without home PCs to play online games. These cafes also serve as the center for social interaction for 18-24 year olds.
"Chinese gamers pour into the cafes every day to play online and LAN games with friends. They spend money in the games on virtual gifts for friends, services for their characters, and virtual items to help with leveling," said Hanson. "The intertwined nature of China's Internet cafes, social gaming culture, and few entertainment alternatives at a low price point, will continue to be the basis for strong growth through 2011."
Other market segments fared well in 2006 and show promise for 2007 and beyond, particularly PC offline games and console hardware. Legitimate sales of PC offline games rose 28.5% to 904,000 units from 700,000 in 2005, led by titles from Taiwan. Console sales, currently prohibited in China, remained active in the grey market, demonstrating that hard-core Chinese gamers are devoted to buying the latest products for gaming even though they cannot buy them through legal channels.
Hanson added: "If a game company can get an impressive game or console to market in China, the gamers there will embrace it. That said, getting a product into the market is not easy. The complex regulatory environment in China is still the greatest barrier to entry for foreign game companies."
The 2007 Chinese Video Game Market Annual Review & Forecast Report by Niko Partners is a thorough review and forecast of the 2006-2011 PC online, PC offline, console, handheld games and hardware market. Based on 75,000 points of data collected by Niko Partners in 10 Chinese cities in March 2007, the study provides one of the largest and most comprehensive sources of information on gamers, Internet cafes, regulations, online game operators, games, hardware, distribution, retail, and key companies in the industry. The report is the first of three in Niko's 2007 annual subscription on China's video game industry.