Top online game companies suffer drop in Q2 income

The total income of China's six leading online game developers suffered negative growth for the first time since 2009 in the second quarter this year, and analysts said Thursday it signaled a period of transition and that the companies will need to adjust to meet the challenge.

"One of the reasons for the poor performance is that the second quarter is traditionally a weak season for the game industry, and few companies promote their products," Sun Mengzi, a tech analyst at Analysys International, told the Global Times Thursday.

"But the performance also mirrors the sector, which has stopped growing quickly and entered a transition period. Companies may see their market ranking changed and more diversified products will be offered," said Sun.

The six companies are Tencent Holding Ltd, Shanda Games Ltd, Beijing Perfect World Network Technology Co, Giant Interactive Group Inc, ChangYou.com Ltd and NetEase Inc. These developers together have a share of some 80 percent of the online game market, Sina Tech reported Wednesday.

All the developers unveiled their Q2 financial reports by Tuesday and half of them saw their revenues falling compared with the previous quarter. The poor results signaled a dangerous time ahead for the sector, the report said.

Perfect World's revenue registered a quarter-on-quarter decline of 5.9 percent while Shanda Games's transaction revenue dropped 18.6 percent compared with the first quarter, according to their financial reports.

"The data shows that the traditional client-based game business, which is the main business of these developers, has reached a bottleneck, with homogenized competition and limited growth in user numbers," Zheng Jiyou, an industrial analyst with Huarong Securities in Beijing, told the Global Times.

"However, Web-based games and games for mobile devices offer new opportunities and some listed companies have started shifting to these areas from client-based games over the past few months," Zheng noted.

Mobile games have become the fastest-growing business for the domestic online game market, growing at 50 percent from last year, according to China Mobile Communications Association.

Though many believe that Web-based and mobile games will be a new driving force for the sector, Sun believes that client-based games will remain the most important.

"Web-based and mobile games have seen their user numbers surging. But in terms of payment and having regular users, client-based games are still key," Sun said.

"For client-based game developers, the most important thing now is to provide more entertaining products," she noted.