Online casual games continue to gain traction and are expected to constitute 30% of the online games market by 2008. The popularity of casual games is expanding the online gaming culture beyond Internet cafes and into the homes of users. While casual games continue to grow, massively multiplayer online role-playing games (MMORPGs) still constitute the largest online gaming segment in China. Top MMORPGs can generate $80 million annually in China.
Compelling and diverse game content, the low cost of playing games at an average of $0.05 per hour, and the lack of entertainment options in China drove growth in the online games market. A strong consumer culture, with rising demand for leisure and technology products, also contributed to the burgeoning games market.
China will continue to flourish as a game development and outsourcing destination due to its low cost structure, large labor force and robust infrastructure. Companies can increase their production capabilities and achieve cost savings of 20% to 40% by outsourcing disciplines such as art creation. However, the captured savings from outsourcing to China is often less than companies expect. Other cost drivers such as travel, training and project management can erode the cost savings derived from outsourcing.
Outsourcing to China comes with significant challenges. These challenges include concerns over product quality and intellectual property protection, cultural differences and the competition for skilled employees. As game developers in China accumulate experience and develop best practices, Pearl Research believes product quality will improve in the long - term.
