Sat, Sep 17, 2005 - Page 10 News List

Games sector faces bleak future

GLOOMY OUTLOOK Local video-game makers are doomed unless they can come up with their own killer products or break into the China market, analysts said

By Jessie Ho  /  STAFF REPORTER

The nation's video-game manufacturers saw a weak summer this year as a result of the saturated market and the lack of blockbuster local games, analysts said yesterday, adding that the industry's near-term prospects seem equally gloomy.

"I think the decline of Taiwan's online gaming industry has already reached the halfway mark," said Derek Wu (吳奉遠), an analyst at Capital Securities Corp (群益證券). "As a result, we hardly pay attention to game-company stocks anymore."

With market saturation increasing against a background of stiff competition in China, the local games industry will plummet if local developers fail to come up with their own killer products, he said.

Soft-World International Corp (智冠科技), the nation's largest game distributor, posted a 0.35 percent drop in sales to NT$202 million (US$6.14 million) last month from a year ago, while smaller rival Gamania Digital Entertainment Co (遊戲橘子) saw sales falling 5.25 percent to NT$158 million in the traditional peak month.

"The market is getting tougher over time, and I think a few smaller players will be forced out of the business soon," said Vera Wu (吳淑玫), an investment relations official for Wayi International Digital Entertainment Co (華義國際), the nation's No. 3 games producer.

Wayi reported a 2.13 percent decline in sales to NT$19.59 million last month. The company saw a deficit of NT$2.25 per share for the first half of the year.

With game players constantly demanding better quality, it takes developers longer to produce new games. Consequently most distributors import games from South Korea or Japan to fill the hiatus, Vera Wu said.

But the road to homemade games is also getting bumpier as a result of limited resources and a shortage of talent, she said.

Soft-World has injected massive funds into research and development at its subsidiary ChineseGamer International Corp (中華網龍) in a bid to broaden its homemade game portfolio, Wu said.

But after years of efforts, ChineseGamer has become Soft-World's biggest money loser, making the company cautious about developing its own games, she said.

Unlike the South Korean government, which actively nurtures the the nation's game developers, local game companies rarely receive any help from the government despite promises to promote the digital sector as a strategic development industry, Wu said.

If they are to survive, Taiwanese companies will have to expand to the massive market in China, where players share the same language and culture with Taiwan, she added.

However, it is not that easy to capitalize on the lucrative Chinese market after Beijing implemented a protectionist policy to safeguard its own game developers, said Hsieh Ming-chuan (謝明娟), chief publicist at Soft-World.

Soft-World entered China more than 10 years ago, where it established channels to distribute both its own and foreign games.

However, the company decided to close its outlets in China last year and license its games to Chinese vendors because of various limitations on Taiwanese companies.

Nonetheless, Hsieh is not that pessimistic about the industry, saying the company is planning to introduce a variety of games aimed at various segments of the market in Taiwan.

The company believes there are still new markets to tap, Hsieh said.

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