The games outsourcing market in china, will exceed $1.3 billion in 2008, according to a recent research Games Market in China by Pearl Research, a San Francisco-based business intelligence and consulting firm.
According to the research findings, online casual games continue to gain traction, and are expected to constitute 30% of the online games market by 2008. The popularity of casual games is expanding the online gaming culture beyond Internet cafes and into the homes of users. While casual games continue to grow, massively multiplayer online role-playing games still constitute the largest online gaming segment in China.
“By outsourcing to China, companies can achieve cost savings of 20%–40% in areas such as art creation,” says Allison Luong, Managing Director, Pearl Research. “The cost to develop games are exceeding $10 million or more, thus the savings from outsourcing can help increase profit margins and make the difference between a profitable and unprofitable title.”
The key findings of the research also suggest that companies can increase their production capabilities and achieve cost. However, the captured savings from outsourcing to China is often less than companies expect. Other cost drivers such as travel, training and project management can erode the cost savings derived from outsourcing.
The research also says that outsourcing to China comes with significant challenges. These challenges include concerns over product quality and intellectual property protection, cultural differences and the competition for skilled employees. As game developers in China accumulate experience and develop best practices.
“The game development industry is relatively young in China, at less than five years old. Most companies outsourcing to China must develop training programs to ensure their staff is capable of handling outsourcing work. Intellectual property protection is also a concern,” says Allison. “But most outsourcing studios in China have taken measures such as removing USB and CD drives and tracking Internet and e-mail usage to prevent employee theft.”
The study also finds that compelling and diverse game content, the low cost of playing games at an average of $0.05 per hour, and the lack of entertainment options in China drove growth in the online games market. A strong consumer culture, with rising demand for leisure and technology products, also contributed to the burgeoning games market. China will continue to flourish as a game development and outsourcing destination due to its low cost structure, large labor force and robust infrastructure.
