Shanda Games on the upswing

For Shanda Games, its ascent back to the top in the Chinese gaming industry looks to be right on track.

Tan Yanfeng, vice president of Shanda Games, said with confidence that "everything is in order" with the restructuring of the company's business lines given top priority.

Fiscal results indicate the company is on the upswing. According to statistics provided by Zhejiang Century Huatong Group, which currently holds a majority 90.92 percent stake in Shanda Games, the gaming company registered an annual revenue of 3.86 billion yuan ($570 million) in 2016, up 17.6 percent from a year earlier, while net profit spiked 113 percent to hit 1.62 billion yuan.

Founded in 1999, Shanda Games was a leader in the games industry for several years until Chinese tech giants Tencent and NetEase started rolling out games of their own. It was later affected by operational problems, copyright disputes and capitalization issues in the United States, eventually losing its place among the leaders.

But Shanda Games has since clawed its way back by shifting its focus from PC games to mobile ones.

According to Tan, the company's most popular mobile games such as Dragon Nest and The World of Legend have helped it attain record net profits last year. He added that Shanda Games is expected to maintain a 20 percent annual growth rate this year, with net profit likely to exceed 2 billion yuan.

"Mobile games now contribute up to 70 percent of the company's annual turnover. It can be said that Shanda Games has completed its transformation into a mobile gaming company," he said.

In order to maintain the current growth momentum, Shanda Games will implement four major strategies in the following years, said Tan.

First, the company will develop more games in a similar vein to Dragon Nest, which rakes in more than 1 billion yuan in revenue every year. Divine, a new mobile game that is scheduled to be rolled out in August, is one of the titles the company has high hopes for. The game's primary audience is high school students and female players.

"The upgrade of segmented markets will be a major trend in the gaming industry. This is why we are targeting a very specific group of players for Divine," explained Tan.

The second strategy involves consolidating the company's game publishing business over the next few years. Shanda Games is the publisher of several game titles, including Legend II which was developed by South Korean studio Actoz in 2001.

Publishing has proved to be a money-spinner — Legend II accounted for 60 percent of the company's annual income in 2009.

Creating an intellectual property pool is another key strategy. During the 13th China International Cartoon and Game Expo held in Shanghai in early July, the company introduced a new comic work titled Wulinghou that is centered on the life of the descendants of Chinese superheroes. Tan said the comic could be adapted into games and perhaps even film or television works in the future.

According to senior game industry analyst Zhang Liangwei from Soochow Securities, Shanda Games will likely create a strong profile of intellectual property products based on the 70 games it has developed.

Globalization has also been identified as a major growth driver. Tan suggested that more of the company's games could soon be made available to players around the world.

Shanda is no stranger to the overseas market. Its entry into the overseas market was marked by the collaboration with South Korean studio Actoz. The company later sold an online real-time KTV game to Taiwan in 2007 before establishing a team to focus on overseas markets.

By the end of 2009, Shanda Games had promoted 15 of its games in 48 countries and regions. That same year, the company was the largest initial public offering on Nasdaq. However, Shanda Games was delisted in 2015 due to the market's undervaluation of Chinese companies in general.

"The Chinese mobile game industry is now world-leading. This gives us much room for development in the international market," he said.

Latest statistics by London-based venture capital firm Atomico shows that China has already overtaken the US as the world's largest gaming capital in terms of market size. The total game income in China hit $24.6 billion in 2016, with the number of players totalling over 600 million.

According to the global mobile game income list released by gaming industry intelligence provider Newzoo in May, nine of the 10 most profitable mobile games are products of Chinese companies.

But Shanda's main focus will still be on the domestic market. IResearch Consulting Group predicted that Shanda Games will be the most profitable internet company once it goes public on China's A-shares market.

"Although China has become the world's largest game market, and companies such as Tencent have been listed among the top 10 in the world, there has yet to be a leading Chinese game company listed in the domestic market. Going public on China's A-shares market is now a must for us," said Tan.