Business Week on online gaming

Includes: SINA, SNDA
by: Ezra Marbach

The potential for a merger between (ticker: SINA) and Shanda (ticker: SNDA) is leading to renewed interest in China. Here are key quotes from an article in Business Week:

On selling game consoles and software in China:

....counterfeiting is so pervasive in China that it makes little sense for Sony or Microsoft to sell their machines there. The business model depends on companies being able to sell not just the consoles but also the software -- and due to rampant piracy, they can't make money in China selling software.

Hence the popularity of online games, where the operator keeps the software relatively safe and secure on corporate servers and players only need access to a PC and an Internet connection.

On government recognition of the economic effects of online gaming:

....the Chinese government, recognizing that online gaming has the potential to be a blockbuster business, is pushing several measures to support the industry. Beijing has launched an online-gaming project. In typical communist fashion, it's a five-year plan to publish 100 homegrown games. The government is also setting up Internet innovation centers to help boost the capabilities of game programmers. China's leaders even plan to establish a professional game college to train software engineers in the arts of developing online games.

Quick thought: SINA could benefit from both SNDA's close relationship with the government, and the government's support for online gaming companies. With SINA reeling from the government's latest crackdown on companies advertising for fortune telling services, there exists another reason among many, why a SINA-SNDA combination could be a good fit.