The China Dilemma

In the past few weeks, there’s been a flurry of updates with regards to the regulatory approval of mobile games in China. First, SAPPRFT (the agency formerly known as SARFT… the lengthened acronym reflects its growth in scope) mandated that from July 1 all mobile games must be pre-approvedRumored details of the approval process (link in Chinese) quickly conjured farcical images of everything wrong with bureaucracy: developers were supposedly required to mail in 2 smartphones (with activated numbers and data-plans) and 5 DVD copies of the game package…

More recently, another agency with growing clout (CAC, which has a say in all things Internet related, and whose former head whom Mark Zuckerberg famously hosted at Facebook HQ a couple of years ago) issued a broad set of requirements on mobile apps with regards to user data.

Collectively, these new developments fit the macro trend of regulatory tightening in China during the past few years. For domestic developers, they represent an ever-growing cost of doing business at home, and there are already predictions that the pre-approval rule will wipe out a large swath of indie and mid-sized developers. For international developers, they represent the closing of the app store loophole in China: while in theory all games published in China have always required government approval in addition to a domestic publisher, Apple’s App Store ecosystem famously were operating outside this rule. This has enabled western developers like Supercell to effectively tap the China market without conceding publishing rights. Now it seems this is finally being reined in.1

Taking a step back, and coming to the main topic of this post: China has become one of the most important and hardest strategy questions for any game company, thanks to the juxtaposition of the biggest market globally and an increasingly challenging business & regulatory environment. Hence, the dilemma.

There are useful parallels to be drawn between games and other industries. Hollywood, for example, has been grappling with the same question, with even harsher regulatory restrictions (a strict quota of the number of foreign films that can be shown in Chinese cinemas per year, and seasonal blackouts where the box office is reserved for domestic films). Faced with a stagnating US box office in contrast to the tremendous growth in China, Hollywood has resorted to a mix of co-production and content pandering to get around the quotas and SAPPRFT.2 For film-goers, some of these pandering efforts definitely leave a sour taste (and often a WTF reaction), but in terms of strategy there are clearly no ambiguities in Hollywood’s direction and execution.

Back to video-games: in contrast, foreign developers / publishers (the EAs / Activisions / Nintendos of the world) have had the luxury of ignoring China (despite its growing market size), partly because of the complete lack of presence of the console market, and heavy pirating on the PC side. For traditional AAA boxed titles, this has meant that pragmatically China was often not worth the hassle, and one could argue it was better for IP holders that Chinese fans played the pirated original version rather than a version contorted to pass local censors. With the double whammy of the rise of “games as a service” (which has always been the China market’s bread and butter) and mobile gaming, however, these foreign developers are having to have a serious thought on their China strategy.

Without trying to be overly prescriptive – and there are no easy answers – I think the following would be a rough thought process for a developer to navigate the problem:

  1. Reflect deeply on the values of the company and the kind of games you are passionate about creating, and assess if it’s compatible at all with the censors. You would not be in a happy place if regulatory compliance requires challenging your core values, halfway through the process – decide if you are “in” or “out” upfront. For example, if you are all about freely exploring mature themes (and that is the brand you are known for), then it’s highly possible you will never get past the censors, and thus you shouldn’t worry about the market (until a change in the regulatory climate). Many Rockstar games, for example, would probably never pass this test; similarly, many war simulation games (especially those set in World War II) may also have issues with historical sensitivities.
  2. If you do think censors won’t be a big problem (and the big question is what you do in the gray area, such as a game like Diablo 3), consider next how well your business model and platform fits in China. From a market perspective, there is very little space outside of PC/mobile free-to-play, which makes things simple in a way. This doesn’t mean traditional AAA upfront purchase can’t work – Overwatch being a good recent example – but it would be a tougher sell. Offering a try-before-you-buy would probably be a good idea (e.g. Diablo 3 in China, you can play the first 4 Acts for free, the purchase decision happens when you want to play the Reaper of Souls content).
  3. You’ll notice I haven’t mentioned tweaking gameplay (except for the censorship point) – in general I would strongly advise against tailoring gameplay to any particular market. What is fun is fun. Tinkering with game design for a specific market more often than not can lead to strong player backlash, because the hardcore players are savvy and passionate, and there is ample exchange of information between players of different markets.3
  4. Identify a Chinese publisher that you can have the best alignment with, since by law you are required to have a local partner, and this is a marriage you will have to put up with. There are sharp differences in how the major Chinese publishers work and what they are good at. At work, I’ve interviewed lots of people in various Chinese publishers and their western developer counter-parts. While there are some common themes (“The developer doesn’t understand China!” “The publisher’s requests make no sense!”), it is fascinating how different the dev – publisher setup can be, down to the minute details (e.g. is it the developers’ engineers or the publishers’ engineers that maintains/updates the servers) that could make a huge difference in what the player experiences. The publishing negotiations are going to be tough, but be really deliberate here, since it’s a decision you will live with for a long time.
  5. If you are “in”, act like you are all in. Your Chinese publisher is going to offer a ton of suggestions and requests, half of which are nonsense and half of which can take your game to the next level in China. You need to have the team that can thoughtfully assess the input (and distinguish the bullshit from the diamonds in the rough), and the development prioritization in place to actually address them. An easy way to see if you are doing well or not – is China your #1 or #2 market?
  1. Which brings up the question – when will Steam get the axe and be blocked by the GFW…? Since there’s a vast amount of games in Steam that the Chinese government have strong opinions against, especially some of the best-selling ones such as GTAV… To be clear this is not something I wish for as a gamer, just that I think it’s almost inevitable given recent trends.
  2. Plus, Chinese entities are straight-up buying into Hollywood.
  3. Indeed, it’s a popular type of content on Reddit and in the corresponding Chinese / Korean forums to cross-post opinions from the other language forum. Players want to know what other players think.
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2015 Games in China – the year in review

Partly inspired by this Game Informer piece I read over the weekend, I wanted to do a quick write-up of some of the big themes I felt specific to the games industry in China this year.

Rise of the mobile core

For me the biggest thing (and I was certainly late in recognizing this, though I think it’s still not talked about enough in English gaming circles) is the rapid adoption of core PC genres by Chinese players. I only wrote about this recently (when the numbers became too obvious to ignore), but the Chinese dev/publisher efforts have been underway for at least the last few years.

To toss around some hyperbole:

  • The most played and highest revenue MMO across any platform this year may well be Netease’s Fantasy Westward Journey 1;
  • Tencent’s Crossfire Mobile only launched in December, but may already have more active players than CS:GO on Steam 2;
  • and Tencent’s Kings of Glory MOBA has already bested Dota2 in terms of PCU barely a month after launch as well 3

Obviously all 3 data-points above enjoy the benefits of China’s huge market size / population numbers, but they are certainly still very relevant comparisons. Chinese devs have brute-force migrated their core PC genres to mobile and players have largely embraced them. The thing to look out for in 2016 is will these player-bases sustain – if so they will pose some real hard questions (innovator’s dilemma) for the respective PC titles 4.

Esports/streaming bubble continue to inflate

Somewhat similar to global investor trends, in 2015 China also saw continued investment interest in esports, both on the execution front (hot money flowing to teams / tournaments / related ecosystem players like streaming sites) but also on the “story-telling for the stock market” front in a roller-coaster year for the markets.

Wang Sicong’s esports / entertainment empire building continued with the rollout of his own streaming platform panda.tv, and the formation of Banana Culture which will be the operator of the 2016 LPL, amongst other things. He also recently signed a high profile sports announcer from CCTV, a number of Korean pop acts; and the PC cafe chain he owns a stake in is building esports-themed venues nationally.

He’s certainly not the only one; for example I’ve lost track of the number of .tv streaming platforms, and there’s been intense drama this year on the talent competition front (disputes over high profile streamers “breaking contract” to join competing platforms). Similarly, the rumored contracts/transfer fees of pro players continue to raise eye-brows, despite fairly lackluster results this year in various world championships.

On the “selling stories to stock market” front, start-ups / VCs / public companies seem to be eating up the esports concept and are ruthless in packaging it for boosting the valuations of whatever they are trying to sell. Companies with <$100MM annual revenue are getting multi-billion dollar public market valuations based on some esports related concept, despite having probably very little visibility with players or product control. (Better yet, make it “mobile esports”, which is all the rage currently.)

Now the hype cycle may still continue well into 2016, especially since the esports concept seems to be just getting started in the west, with the likes of celebrity investors such as Mark Cuban getting involved. But given the real-economy uncertainties in China I think there could be some quick boom / busts locally…

(If I sound frustrated or cynical about some of these developments – not really, this is really just business as usual in the “Wild East”. The games industry is not isolated from the macro-climate and a lot of this is just indicative of the broader economy.)

Console’s humble beginnings

China only recently removed the console ban, and Sony and Microsoft have been diligently seeding the market (I wrote about consoles a month ago).

In terms of competition, the early results indicate a landslide victory in favor of the PS4, with media reports of 410k units sold vs. XboxOne’s 90k units as of Dec 2015. However these numbers are certainly tiny compared to the player-base.

The big question, same as what I wrote previously, is about content. My working analogy is consoles in China is like Hollywood films a decade ago – there’s some promise, but the difficulties of operating are high (censorship / approval / quotas etc.). This will continue to be a push-pull relationship: some “questionable” content may be able to get past the reviews with enough government relationship building, and some content will be built in mind with the Chinese audience 5.

Additionally, there’s quite a number of local studios trying in earnest to fill the void – creating local console titles that can pass the government review – but the learning curve of building good console content may be high. On the flip side though, there are a pool of console devs in China, thanks to the local dev offices of big global developers such as 2K.

From the gamers’ perspective, a small but hardcore group of players will continue to be hungry for AAA console content, and with the popularity of social media / streaming some of these console franchises are starting to develop a small brand. So in sum, the trend is positive, but it’s really early days yet.

Steam’s (small) splash

In a somewhat similar vein, Steam has had a pretty good year in China, with the expansion of local pricing / payment support in November. (Even before then, China sales of some locally priced content like GTA5 were starting to show up in data analyses.) And within the local hardcore gamer community, it’s no longer a foreign concept to participate in Steam sales. In sum, they’ve had some good growth this year and some of the local prices generated excitement with players.

My personal understanding is that Steam is currently flying under the radar – they don’t have a on-shore presence, and certainly the vast majority (if not all) of their catalog of games have not gone through Chinese government approval. This means a generally degraded player-experience in terms of download speeds, but also the potential risk that they would be targeted by the government (e.g. if there’s a big PR scandal over some game on Steam, say angry parents complaining GTA5 was corrupting their kids). As a gamer, I would certainly not want that to happen, since Chinese players deserve to enjoy the same AAA experiences as players elsewhere.

  1. Chinese media recently reported 60MM cumulative registered players and PCU of 2.04MM in the 9 months since launch; my previous post quoted analyst estimates of $158MM monthly revenue in Nov 2015
  2. CS:GO PCU was around 800k; CF mobile announced 1MM PCU after 3 days of launch, and is rumored to have 10MM DAU
  3. Kings of Glory announced 1MM PCU and 7.5MM DAU recently, while Dota2 PCU on Steam is 1MM
  4. Disclaimer: including League of Legends, which I work on
  5. just like the current Hollywood blockbusters that are bending over backwards to meet Chinese tastes, now that they see the size of the market
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China’s unique core mobile games

This is clearly old news, but Chinese publishers and developers have been hyper-focused on the mobile market the past couple of years, and it has come to a point where at a macro level the Chinese mobile games market is looking significantly different from the western markets.

To present some simple data – according to a local analyst report from CNG, the top grossing mobile games of November in China were:

(The revenue unit is 100MM RMB, so for example 10.22 is 1,022MM RMB or $158MM – that’s a crazy monthly run-rate!)

A few immediate observations from this chart:

  • Very high revenue estimate numbers. $158MM is a crazy monthly run-rate, and even if this was over-estimated by a factor of 5 it is still really impressive
  • Heavily represented by core game genres taken from PC gaming. #1/2/3/4 are fairly typical MMOs for Chinese players (#1 & 2 are two different MMOs based on the Journey to the West lore, published by Netease); #5 is a card combat game leveraging the Kings of Fighters franchise; #6 is a mobile MOBA (that if I may say so looks quite like League of Legends…); #7 is an arcade shooter; #8/9 are the only western games on the chart, and are the typical western mobile strategy games; #10 is a casual puzzle game
  • This is in stark contrast to what’s popular in the west – take the US for example, the top-grossing games still heavily skew towards casual games like Candy Crush and core PC genres like MMO / FPS / MOBA are not highly visible

Another way to look at the data above is to say, the biggest MMO globally in terms of revenue (and possibly player-base too) is likely a mobile MMO only available in China.

As a separate data point, last week Tencent also launched the mobile version of Crossfire, its top FPS on PC (and a regular $1B/year game for Tencent), to some strong initial traction (they announced 10MM downloads and 1MM PCU after 3 days). The Wall Street Journal also reported last week about Tencent’s ambitions to launch its other mobile FPS WeFire in the US after some success in the Korean market.

I think western developers have generally seen these core PC genres as extremely challenging to “port” to mobile. There have been attempts in earnest (e.g. studios like Gameloft have probably tried every PC genre on mobile), but certainly no runaway success like the Netease MMOs or the Tencent FPSes. A fundamental question that would be asked is “why would gamers want to play these games on mobile?”, and while the answer to that question generally applies to both western and Chinese gamers, there are some environmental factors that have made Chinese gamers early adopters here.

In a sense, these games start from the same low-end disruption thesis: they offer an inferior core gameplay experience (in terms of visual and input fidelity, etc.), but excels on accessibility (anywhere, anyone – everyone has a smartphone, any time – since gameplay loops have been optimized to be short sessions).

The diverging environmental factors that may contribute to the observed market difference are as follows:

  • Chinese gamers are generally much less sophisticated and have fewer gaming choices. The Chinese gaming market is heavily skewed towards online games – for example, none of the GOTY nominees at the recent Game Awards have been officially published in China. There seems to be a strong desire to stick to the genres they are comfortable with
  • More generally, Chinese gamers have fewer entertainment options, and gaming is the affordable entertainment option for everyone. So from a “jobs to be done” perspective, gaming in China fulfills a stronger role of connecting people socially, and gamers are used to this type of behavior (playing a MMO to be part of a community / make friends etc.)
  • The broader market context of mobile adoption and mobile tech leap-frogging PC in China. Chinese consumers have been trained to be more mobile savvy (e.g. using mobile payments) in part because the legacy infrastructure was not well-developed (and therefore no switching cost, just adopting cost). Spending more time playing more hardcore games on mobile conforms with this macro-trend

To wrap up – I think it’s possible that China’s mobile games market today is where the western markets will head to in the future. Having played some of these chart-topping games I can say that they have found some core fun that should be universally appealing – the question is who will successfully replicate these formulas for western gamers.

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Consoles in China

Recently the Chinese game site Gamecores did a couple of podcast interviews with the respective China heads of Xbox & Playstation. These podcasts are well worth a listen (if you speak Mandarin) not only because of the topic (how are the console platforms doing in China?), but also because of the insight into the people driving these businesses.

First, the two podcasts (btw, I thought this site is really well made):

After listening to both of these talks, I think the bull case for consoles in China can be summarized as follows:

  • The analogy that consoles in China are like the domestic films market 10 years ago. Back then it was plagued by piracy and entry barriers – now the China film market is rapidly becoming a close rival to the US film market, and Hollywood has found many ways to achieve success in China
  • The government stance towards consoles have shifted (and more importantly) been clarified, clearing the way for some amount of free enterprise in China by foreign console platform owners
  • Both Microsoft & Sony have deep roots in the China market, they are committed to the opportunity, and they are throwing respectable talent at the console problem. Having not really looked at this space before, I gained a lot of respect for both companies and I think their China console heads are decently speaking the gamer language 1

Meanwhile, the bear case for consoles in China, as usual, is focused on content:

  • A substantial amount of the top tier AAA games will not get through the regulatory process to publish in China. Just this year, it’s hard for me to see The Witcher 3Bloodborne or Metal Gear Solid V come through for either ideological or sex/violence reasons, and these are the 3 best games of the year so far IMO
  • The “chicken & egg” problem of Chinese gamers’ willingness to pay upfront for gaming content. Soeda touched on this in his interview – to get high quality localization done, there needs to be confidence in sales; if sales are weak there will be fewer quality localized titles, which leads to lower supply and certainly lower sales
  • Chinese family acceptance of gaming in the living-room. For years Chinese kids convinced their parents to buy them PCs, in the excuse of studying and learning the computer. There’s no such pretense with the console (although I remember Xbox tried to build a case for that with some of its demo videos at Chinajoy last year?)

Personally I’m rather bullish on consoles’ prospects in China. I think console gaming still represents an integral part of the core gamers’ experience and there will probably continue to be a fair amount of console exclusives that really define AAA single-player experiences (think The Last of Us). And with the advent of streaming platforms there is going to be higher awareness with the non-console gamers in China of the type of experiences that they are missing out on. 2

Lastly, I’m also reminded not only of the China film analogy, but also Apple in China. Going back 6 years, I lamented at the time that Apple’s app services are woefully inadequately localized and I mocked them for not “getting China”. Fast-forward to now and they’ve certainly solved many of the implementation problems. I see quite some similarities in the types of challenges that Microsoft / Sony faces compared to Apple, and thus I think those are solvable problems that just need time and consistent drive.

  1. Comparing the two interviewees, surprisingly it’s the Japanese representative Takehito Soeda who comes across as more native, with a fluent Beijinger accent, whereas the Microsoft veteran Xie Weien sounds a bit like an ABC with the amount of English he’s slipping in. The Sony veteran also won the popularity vote from the comments section of the podcasts it seemed.
  2. For example, GTAV is now a staple on Chinese streaming sites, despite never officially launching in China.
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The difficult Google play in China

Early last month there were some news circulating about Google plotting a return to China. The past few days there were also increased speculation after Chinese netizens discovered some changes to what are being hosted domestically by Google.

So far most of the above are just speculation. But it’s worth doing a quick thought exercise.

First, the market context:

  • In Google’s 5 year absence from China, the smartphone revolution has really taken over the market and there’s arguably half a billion users of Android devoid of any Google services
  • There’s been a big entrepreneurship boom (which may be going into hard times currently), with several cycles of intense competition in a number of sectors – staring with the 1,000 groupon clone wars of 2010, to the more recent taxi-app wars and the broader O2O wars. And of course let’s not forget the home-grown Android vendors such as Xiaomi and the battles in the Android space. From the ashes of these intense battlegrounds have risen a number of companies with $10B+ valuations1
  • The traditional big 3 – “BAT” have extended their empires in numerous directions and continue to compete in multiple fronts. For example, Alibaba has made big bets in film entertainment and Tencent is eager to follow suit
  • Apple has seen major success in China – it has generated over $45B revenue in Q1-Q3 of its FY2015, which is about double of Google’s entire worldwide revenue in 2009, right before it exited China

In short, the 5-year opportunity cost for Google in China has turned out to be huge, which is not surprising then if they are indeed seeking an return.

As an aside – I always thought Google’s decision in early 2010 was an incredibly difficult decision, and one which I have always disagreed with (to the detriment of my friendships with some American friends). Not to be overly sentimental, but one of my biggest points of disagreement was that this decision went against Google’s own company mission – to organize the world’s information and make it universally accessible and useful – with such a mission, how could Google shy away from serving Chinese users? Wasn’t exiting China a cop-out to avoid the really tough choices of operating in that environment?

But to come back on-topic – if exiting China was tough, coming back will be tougher:

  • What is Google’s value proposition to Chinese consumers? Most of its services have been fully replaced by local competitors, who are arguably more nimble and responsive to local user needs
  • What does Google focus on? The rumored Google Play makes some sense, since they should prioritize re-establishing a position in mobile, while desktop search is slowly but surely becoming irrelevant
  • Can Google find any local allies? Out of BAT, Alibaba probably has the least conflicts of interest with Google (Tencent / Baidu both own big Android app stores); in the Android vendor space, it has already partnered with Huawei for a Nexus device, so perhaps Huawei can return the favor somewhat in China
  • How much autonomy / empowerment will the local team have? Can they attract the type of talent they want, given their flip-flopping in China?
  • Fundamentally, how much product experience is Google willing to sacrifice/compromise to meet the government’s requirements?

Given how nasty the 2010 exit was from a relationship stand-point, I suspect Google’s return will be tiny baby steps at first.

  1. Xiaomi, Didi-Kuadi, and the new Meituan-Dianping merger are a few leading examples
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Mobile gravity, and what it may mean for games (part 2)

Link to Part 1

In hindsight, a lot of my first post was about mobile gaming as the classic low-end disruption to PC&console gaming – mobile devices may be more constrained across the board (power, storage, screen size, input precision etc.), but they can compete along other dimensions (almost universal availability to play, wherever your are; hardware that’s not available to PC&console, e.g. camera, motion sensors etc. that unlock new design space; etc.). And also using the disruptive innovation analytical framework, it may very well be possible PC&console are over-servicing the player needs – e.g. it’s nice to have ever-more realistic graphics, but there’s probably a case of diminishing returns for actual player value delivered by these graphics. (The rest of the framework applies nicely after this setup – I won’t bore you with writing out the conclusions.)

I ended the first post with a quote from The Terminator series – “there’s no fate but what we make for ourselves.” In my view it is by no means a fore-gone conclusion that the PC&console product category will be sucked in by mobile gravity. It is possible they can thrive at an arms’ length. Again, to think this through we can look from the lens of “jobs to be done”. Some examples here:

  • The cinema business is thriving in the digital age, and IMHO suffering minimal to no impact from online piracy. One big reason is the industry has convinced the audience that going to the cinema is a fun and unique experience compared to other film-viewing experiences – it is the aggregate of the high-tech audio-visual hardware (e.g. IMAX screen, Dolby surround), the mood & atmosphere of the cinema, the social event characteristics (group activity with friends / family, it is almost socially unacceptable for someone to go to the cinema by him/herself), as well as any differentiating service the cinema tries to provide (e.g. adult-only viewing in laid back seats with food&drinks service)
  • The arcade business in Japan. I’ve not visited Japan yet, so this is mostly hearsay, but my impression is that there is still a rather lively arcade business in Japan, and it has been ingrained somewhat into the cultural fabric. It’s worth pondering why people still go to arcades when there’s likely a better selection of games at home on their consoles – what are the jobs being done?
  • Similarly, the PC cafe ecosystem in Korea, and other developed Asian economies (e.g. Taiwan, and the coastal area of China). As a ballpark figure there are still something like 10,000 PC cafes in Korea with probably a million PCs. As far as I understand it, it is a social norm in Korea for people to go to a PC cafe after work/school and play for a couple of hours, just like how they may go to bars / restaurants / clubs. It is a quite mainstream social activity – with emphasis on social being a primary job being done here. This is why Korea is probably the most advanced country in the world in terms of internet connectivity (fiber to the home, 4g networks etc.) and yet people still flock to PC cafes.
    • If you are wondering what effects smartphone adoption has had on Internet cafes – in China actually there’s a renewed growth of Internet cafes (largely driven by government removing stringent license requirements), and a new wave of more sophisticated cafes – WYWK for example has customized hardware/software as well as a mobile social app that generated headlines previously for being a hook-up tool (sex has consistently been a primary “job to be done” of social apps). Also if you visit any PC cafes in China, you’ll notice that the primary application (by far) are games, similar to Korea

To go on a bit of a tangent – in the specific case of PC cafes, I think there’s a strong argument to be made that a PC games developer can be financially viable by focusing on this channel. I don’t mean just using biz-dev tactics to ensure an install base / player-base in PC cafes – most competent publishers know how to do that already. Instead, I’m thinking about game experiences that acknowledge the PC cafe setting and strategically leverage them in the game design, e.g.:

  • Core gameplay that really takes advantage of keyboard+mouse input method
  • Strong multiplayer focus, if not multiplayer only. PVP or team-based PVE
  • Preferably session-based play, with minimal setup & downtime in between sessions
  • In-cafe location-based-services which also scale online, e.g. in-cafe tournaments/game-modes, local social features, local leaderboards, cafe vs. cafe leaderboards etc. Also provide incentives to repeat play from the same cafe (e.g. cafe-based reward loops – this aligns the developer’s interests with the cafe’s interests, and also makes sense for players because it creates a more stable local scene)1

The first 3 points are super generic and pretty much applies to all the top PC PVP games right now (League of LegendsDotA 2, CS:GO etc.). They can be enjoyed in any setting but they are clearly best enjoyed when you and your friends are physically sitting together. The last point has not been done well for any game developer (none that I know of)2, probably partially because PC cafes are not a thing in North America and that’s where most of these games are developed.

The above side-discussion is to illustrate one area where PC developers can use an existing infrastructure to hopefully sustain against mobile gravity. At the end of the day, players will continue to seek fun / engaging gameplay experiences, and if these experiences are conveniently available and part of an accepted lifestyle (as PC cafe gaming is in Korea), then PC gaming as we know it today can continue to thrive.

To go full cycle back to the start of this discussion series though, developers should be super conscious why they made a platform choice in the first-place. Is it because your existing skill-set / dev-tools / infrastructure are tied to a platform? Or is it because the gameplay experience you are going after are best suited to that platform’s strengths? The chances of success in the former case are much lower than the latter.

And perhaps one other take-away, for all developers regardless of their platform choices – be conscious that with regards to the general internet, the mobile internet IS the internet and to a first approximation everyone should probably be thinking mobile first when it comes to around-the-game experiences (like community forums and other social engagement).

  1.  Take note what Magic: The Gathering did for its hugely successful local play programs, and recreate that experience digitally with PC cafes as the venue
  2. Interestingly, ecosystem developers in China have made serious attempts at this space – but because of lack of integration with the core game, and sometimes malicious intent, the results are shaky from the players’ perspective
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Apple’s China PR problem

Not that many years ago, I had written a rather harsh post on Apple’s iPhone launch in China. I remember the surprise I had when I got a comment on the post debating some numbers I had written, with the IP address of the comment suggesting it’s coming from the Apple campus in Cupertino (I can’t seem to find the comment today). Back then I had joked to my b-school room-mate, “there goes my chance of working at Apple!”

Fast forward a few years, and Apple has pleasantly surprised me with how much it has grown its business in China. In many ways, this was a perfect storm – the rise of the iPhone (and iPad later) globally coincided with China’s boom in luxury spending. iPhones and iPads became the perfect luxury item in consumer electronics, and a whole wave of Chinese consumers eagerly grabbed every unit they could get their hands on.

Apple posted $6.8 billion in revenue from the Greater China region in the previous quarter (their fiscal Q1 2013, which was reported in January). That is a massive amount, and I honestly struggle to think of any other international company that generates more revenue from Chinese consumers (the only companies I could think of that could challenge that number were global car brands – I tried searching for the revenue of VW’s China JV, but only found a quote for 2004 revenue of 38 billion RMB – roughly $5 billion by the old FX rate).

The sheer size of Apple’s China business (and the big growth potential) means that it must take any local PR crisis very, very seriously. (Read Bill Bishop’s piece in the NYTimes for a recap and his opinion.) So while it may be surprising to many that Tim Cook signed and issued an apology letter (in Chinese) to local consumers, I would actually argue that Apple’s response is barely adequate, and they should continue to be in full crisis management mode. It’s unfortunate that Apple has to deal with rather shady counter-parties such as various branches of China’s state media, but as long as Apple stays true to its ethics (and steer clear of Foreign Corrupt Practices Act violation), it should do everything in its power to control and mitigate the PR damage being done.

There are a few other pointless, but rather interesting (in vacuum) thoughts on this topic:

  • One could certainly ponder what Steve Jobs would have done if he was still at the helm. Tim Cook has always had the image of the pragmatic and efficient CEO, so it rather fits his persona to issue the apology. Would Jobs have done the same? Would people bash him for kowtowing to the Chinese government?
  • Comparisons to Google’s China exit are certainly going to be brought up, but such comparisons are doomed to be pointless. The straw-man counter argument is that Google never had that big of a business in China, so the upside versus the costs (to its public brand, its core values etc.) are drastically different – would Google have given up China that easily if it were making $10 billion a year in China?

(I apologize for the lack of substance in this post – I felt compelled to comment on the trending topic, but really there’s little to say)

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