Chinese game developers bet on smart phone games

As the number of smart phone users explodes, the race to grab the mobile games market is picking up pace. Our reporter Ying Yiyuan checks out several game businesses to see who's actually making money.

Having fun wherever you are, that's the beauty of smart phone games. The industry value jumped to 2 billion yuan in the first quarter, up 30% from the previous quarter.

At Zhejiang University's business incubator, many startups are mobile game developers. Gao Chao started a game company Hi Wan in 2011, with a team of just 7. His first mobile game is going online in two months, and his company is yet to make a profit.

"In the past, if a new game has good quality, then there is opportunity. But now the competition is much fiercer, it requires a lot of capital and specialization to be successful. It's harder for small companies." Gao Chao, CEO of Hangzhou Hi Wan Technology said.

The distribution costs of mobile games are low as getting in the apple store and android is free. But to stand out from tens of thousands of games, game companies are looking for established partners.

"We have a positive cash flow, and we are thinking about cooperation with those companies who have strong distribution channels. For example many of our mobile games have exclusive cooperation with Tencent." Li Xin, CEO of Hangzhou Wooduan Entertainment said.

"We cooperate with cellphone makers like HTC and Samsung. Our game will be pre-installed." Fang Ming, CEO OF Hangzhou Qiyi Technology said.

Investors are getting in the game big time. Companies like Datang Telecom and Huayi Brothers have all bought game developers in the past few months. But analysts say less than 10% of startup companies are profitable.

"For many game developers, I am afraid to invest. The estimated value is too high. Also I am skeptical of their ability to sustain profitability. They may make a lot of money today from one game, but how about tomorrow?" Wei Wei, Presidentg of Zhejiang Innowation Fund said.

For game developers, it may still be too early to call the winners.