In this article I will provide investors with updates on the four new titles operated by Chinese online game company Giant Interactive Group (GA): King of Kings III, XT Online (Xian Tu), Dragon Soul (Long Hun), and ZT Online II. I believe these games indicate that Giant is making progress in revenue diversification. Among these four games, I believe XT Online is the most likely one to become a hit game, with 200K+ Peak Concurrent Users (PCU) and $5-$10 million revenue per quarter.
King of Kings III usage has likely peaked shortly after entering open beta on April 27. Currently its PCU are around 80K, according to my research. I believe the major reason for King of Kings III's quick maturation was the fierce competition in the 3D MMORPG category. In this category, elite games such as World of Warcraft, Zhu Xian, and Aion have already taken dominant market share among 3D game players in China, who are a much smaller group than 2D and 2.5D players but are much more difficult to satisfy.
XT Online (Xian Tu) has been doing well since entering unlimited closed beta on May 20. Currently its PCU are around 110K, according to my research. I note XT Online is Giant's first 2.5D game. Its look-and-feel is very similar to Changyou's (CYOU) TLBB, the leader in the 2.5D category. Although I don't think XT Online can surpass TLBB's 900K+ PCU record, I think Giant's strategy of learning from TLBB will certainly reduce the chance of failures in XT. Based on my assessment of XT, I believe this game's quality and 2.5D game category's large user base will allow it to potentially reach 200K PCU and generate $5-$10 million revenue per quarter.
Dragon Soul (Long Hun) is still in the unlimited closed beta stage, which started on January 21. The game has gone through several server consolidations during the past five months, indicating that it still needs significant improvement in game content to stablize its player base. Given the limited size of the 3D player base in China, I believe it is difficult for Dragon Soul to attract those sophisticated 3D game players away from leading games such as World of Warcraft, Zhu Xian, and Aion. I forecast Dragon Soul to have similar performance to King of Kings III.
ZT Online II has recently finished its second round of research & development testing and received mixed user feedbacks. ZT Online II has achieved significant improvement in graphics compared with prior titles in the ZT game series. Unlike Perfect World's (PWRD) Zhu Xian 2 and Changyou's (CYOU) TLBB 2, ZT Online II is an independent game, not an expansion pack. I believe Giant did this because it wanted to implement its new C2C-trading-commission-based revenue model in a new game to avoid causing earnings fluctuation to its long-time flagship game ZT Online. In my view, ZT Online II is a nice complement to the existing games in the ZT series. It may not become a hit game, but it will help Giant further expand ZT series' player base and extend ZT series' life cycle.
Disclosure: No positions