Online vendors to be hit hard

By Tuo Yannan and Wang Xing (China Daily)
Updated: 2010-08-09 15:01
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Online vendors to be hit hard
Kingsoft promotes one of its online games at an international network exposition in Beijing. Wu Changqing / for China Daily 

Vietnam's curbs on Internet cafes to slash Chinese gaming profits

BEIJING - Vietnam's ongoing national crackdown on online games will impede Chinese players in the country, where Chinese vendors make up a large chunk of the market share.

Many Chinese online gaming firms said they have suspended their marketing activities and stopped launching new games in the Southeast Asian country.

Vietnam's Ministry of Information and Communications launched a new regulation on Aug 3 restricting Internet access in Internet cafes and banning online game ads.

The new regulation was aimed at reducing and preventing juvenile crime in the country. Government officials said they hope to crack down on games with violence, gambling and pornographic content and create a game rating system, according to Vietnam News.

Zhang Wenbing, vice-president of Chinese game vendor Kingsoft Group, said the Vietnamese government's crackdown on online games will disrupt the company's marketing activities in the country. Kingsoft currently operate four games in Vietnam and controls 60 percent of the market.

"I think the ban will have some impact on our games operated in the local market," Zhang said. But he also noted that the company is still optimistic about the Vietnamese market, which contributed 15 percent of the company's total revenue.

Wang Lei, co-founder of Linekong, one of China's major online game vendors, said the company has "suspended plans to launch several new games in Vietnam because of the new regulation".

Linekong currently is operating a popular online game called "Journey to the West" in Vietnam, which accounts for about 10 percent of the market share.

Wang said Vietnam contributed nearly one tenth of the company's overseas revenue. He said the direct impact of the new regulation is unclear.

China's online gaming firms took over 70 percent of Vietnam's online game market, according to industry experts. Big Chinese online game companies such as Kingsoft, Giant, Shanda and Perfect World are all running online games.

"The new regulation will have a significant impact on Chinese companies," said an official from Chinese online game company Perfect World who declined to be named. He said the Vietnamese government has actually stopped approving new games and the potential losses for Chinese gamers would be "huge".

According to the data from Vietnam Internet Network Information Center, the number of Vietnamese internet users had reached 22 million last year, about one-fourth of the total population.

Online gaming attracts about two to three million people in Vietnam, according to local media reports.

"Although the time limit will not directly impact the sales revenue of Chinese online gaming companies, it will become a problem to launch new online games in Vietnam, and impact Chinese companies' long-term profits," said Tao Qinzhu, an analyst from research company Frost & Sullivan.

Tao said Vietnam's crackdown will result in a decline in the company's sales of virtual items, which are the major revenue generator for Chinese online game vendors.

Yu Bin, an analyst from Dratio, a Chinese research firm, said many small Chinese online game firms may have to quit the Vietnamese market due to the new regulation.

"From this pending regulation, we can tell the determination of the Vietnamese government to (control) the online gaming market, but it also indicates that the government is using an introverted attitude to deal with crime," Yu said.

Chen Limin also contributed to this story.



Many Vietnamese gamers spend $3-$6 per month. Some even spend, on average, $31 per month on playing games, especially those at premium Internet cafes. These consumers drive the digital entertainment and online gaming market with their virtual purchases.

The top online games in Vietnam attract up to 200,000 users.

Internet cafes in Vietnam are consistently crowded with users playing online games.

Approximately 50 percent of Vietnam's total population is under age 25, and are known for being tech savvy, thus making them a high priority demographic for digital entertainment companies.

Source: Pearl Research


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Online vendors to be hit hard