Online Game: Shanda's Story of Success Strategy Report Summary

Essay by jspark17University, Master's July 2004

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China online game industry has seen another dramatic growth in 2003. According to the US- based research house International Data Corp (IDC), the online game industry's actual sales grew by 45.8% from 0.91 billion RMB in 2002 to 1.32 billion RMB (US$159 million) in 2003. The total population of internet users in China has reached 78 million in 2003 and 13.8 million of them, i.e. 18% of entire internet population, are paying a fee for playing online games. The total market value of online game industry was projected to reach 8 billion in year 2006. At the time, Chinese internet population may reach 1.41 billion, while online game population may be 42 million. In addition to the industry's rosy future, today's major players are enjoying a superior real cash flow, 2 million RMB per day, with a 50% profit margin. Lured by the unparalleled profitability and astonishing growth potential, more and more investors rushed into the industry.

The number of online game operators has reached 103 and more than 150 online games are currently under operation.

Founded in 1999 and released its first online game 'Legend' in late 2001, Shanda has remained as China's online game market leader in 2003. Now carrying 8 online games, Shanda is holding a dominant 31.1% market share, which is almost twice of that of its closest follower. "As of end May, 2003, Shanda has total 140 million registered users on its online game platform with all released games. And the number of concurrent users exceeded 850 thousand, across 22 provinces, over 40 major cities and over 500 clusters of servers (over 5000 servers), as well as over 350 thousand end outlets. (Quoted from Shanda's website)" Shanda's success can be attributed to following factors:

1) Its E-Sale system, an e-commerce platform enabled the company's direct...