Shanda Games revenues drop

Shanda Games, a NASDAQ-listed online game developer in China, on Tuesday reported declines in its net revenues and net income attributable to shareholders, mainly due to slow growth of its core business and difficulty in acquiring new users, analysts said.

The game developer had total revenues of $4.68 billion in 2012, a year-on-year decline of 11.4 percent, and net income attributable to shareholders of $1.11 billion, a decline of 12 percent, according to its unaudited consolidated financial results published Tuesday.

The company's fourth-quarter revenues came in at $172 million, lower than the $173.5 million of its competitor ChangYou.com, the gaming division of information portal Sohu.com Inc. It is the first time Changyou has edged out Shanda Games as the country's third largest online gaming company by revenue. Tencent and Netease's gaming divisions ranked first and second.

"Our fourth-quarter results were in line with our expectations as we continued to strengthen our franchises, expand our game portfolio, and offer new content through various platforms and distribution channels," said a company press release, quoting CEO Zhang Xiangdong.

Shanda's sliding performance is attributable to a growth slowdown of massively multiplayer online role-playing games (MMORPGs) – Shanda's core business – which is facing competition from casual and online games, Xue Yongfeng, an online gaming analyst at Internet intelligence agency Analysys International, told the Global Times Tuesday.

MMORPGs have reached a bottleneck of growth in China, giving way to rapid growth of browser games, which target Web surfers as clients, and mobile games, which users play on their phones, Xue said.

Browser games and mobile games registered 43 percent and 53 percent year-on-year growth respectively in 2012, outpacing MMORPGs' 19 percent year-on-year growth, according to statistics from market intelligence provider EnfoDesk.

"It is increasingly difficult for role-playing games to attract new users, and Shanda is at a disadvantage compared with Sohu's Changyou as Sohu is a major information portal, which makes it easier to attract new users for its gaming division," Xue said.

Though Shanda is trying to diversify its portfolio by developing some mobile games, MMORPGs still account for more than 90 percent of its business revenues, as they do for many others including US-listed game developers Giant Interactive Group Inc and Perfect World Co, he noted.

The privatization of parent company Shanda Interactive led to mismatched resource allocation and a lack of management support for Shanda Games, which is also a cause of its unsatisfactory results, Cao Di, an analyst with Internet consultancy firm Analysys International, told the Global Times Tuesday.

Shanda Interactive delisted from the NASDAQ on February 15 after a management buyout. Shanda Games said in the press release that it expects to launch a beta version of a new game titled Rift in March.