Microsoft and BesTV alliance seen as positive for US company

Updated: 2013-09-25 07:21

By Shen Jingting (China Daily)

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Microsoft Corp's new alliance with BesTV New Media Co, a Chinese Internet protocol TV service provider, will help the US-based software giant to make inroads into China's video gaming market after the company failed to launch its Xbox products and services in the country.

On Monday, BesTV, a subsidiary of one of China's major broadcasters - the Shanghai Media Group - said in a filing with the Shanghai Stock Exchange that it has formed a joint venture with Microsoft, to develop "next generation family gaming and entertainment products" and offer related services.

The total investment in the joint venture is $237 million, with BesTV holding a 51 percent stake and Microsoft 49 percent. The joint venture will have a registered capital of $79 million.

Analysts pointed out that Microsoft might finally be able to successfully launch its video gaming business in the Chinese market based on the cooperation with BesTV. Since the joint venture will be registered in Shanghai's pilot free trade zone, Microsoft might be allowed to offer gaming products and services to Chinese mainland customers.

The Chinese government said in July that it will allow foreign game console companies to sell their products in China if they register in the Shanghai free trade zone and go through a content endorsement program, relaxing a decade-long ban targeting the country's game console market.

In 2000, seven Chinese ministries jointly banned the manufacturing, sale and import of game consoles in China on fears of potential harm to the physical and mental development of young people.

However, products from major game console companies across the world, such as Microsoft, Nintendo Co Ltd and Sony Corp, are still being exported to China via illegal channels.

Microsoft and BesTV alliance seen as positive for US company

The joint venture between Microsoft and BesTV creates a legal platform for the US company to sell its gaming products and services, said Xue Yongfeng, an analyst with Beijing-based research firm Analysys International.

"However, the question remains. Will Microsoft truly sell its Xbox products under the joint venture or will it just design tailored products and services for China?" Xue said, pointing out that Microsoft did not unveil detailed information regarding the joint venture's business model.

BesTV is a major Chinese Internet TV service operator. According to its website, it owns the world's largest IPTV user base of more than 16 million.

"The resources of BesTV, including its IPTV licenses, video content and user base, may aid Microsoft's family entertainment products, such as the Xbox, to land in China," said Wang Yumei, an analyst with China International Capital Corp.

Microsoft defined its latest Xbox One game console as an all-in-one home entertainment center and added a set-top box function to the system. But if the product is to be launched in China, Microsoft has to work with local partners with license and content resources. Therefore, BesTV is the right candidate, Wang said.

Lin Lin, an analyst with Shenzhen-based Guotai Junan Securities, said that if the Xbox successfully hits the Chinese market, its strong gaming capabilities and rich software resources, combined with BesTV's content and platform, will create a competitive edge over rivals in China.

BesTV's shares increased by the 10 percent daily limit on Tuesday, hitting 51.11 yuan ($8.35) per share.

In an e-mail statement sent to China Daily on Tuesday, Microsoft confirmed the cooperation project with BesTV and said it wants to explore new opportunities in Shanghai and in China.

The software company said it believes there's great market potential and partnership opportunities in the country.

"This is the first step of many to come for Microsoft and BesTV and we look forward to exploring new opportunities for bringing entertainment offerings to China," the statement said.

(China Daily USA 09/25/2013 page16)