Alibaba mobile game plan to benefit large Chinese developers

PUBLISHED : Friday, 10 January, 2014, 1:28am
UPDATED : Tuesday, 21 April, 2015, 11:20am

E-commerce giant Alibaba's foray into mobile games and its generous revenue-sharing plan spell good news for the mainland's top listed online game developers but is expected to have minimal impact on market leader Tencent.

Perfect World, NetEase, and Shanda Interactive Entertainment, which are all listed on the Nasdaq, and the New York-listed Giant Interactive were expected to be among the major beneficiaries of the Alibaba initiative, analysts said yesterday.

Alibaba unveiled on Wednesday plans to soon launch its own mobile gaming platform as part of a broader strategy in the mainland's burgeoning mobile sector.

The new platform will offer game developers 70 per cent share of sales, while Alibaba will take 20 per cent to cover the cost of distribution and marketing. The remainder would be donated to a charity fund for children in the mainland's rural areas.

A Barclays research note published yesterday said mobile game platforms would need to change their revenue-sharing schemes because of Alibaba's plan. Qihoo Mobile Assistant and 91 Wireless, for example, typically take a 50 per cent share of sales after paying telecommunications carrier fees. Other platforms pocket as much as 70 per cent.

Alicia Yap, the report's lead author and head of China internet research at Barclays, said: "If Alibaba's mobile game platform succeeds in becoming a meaningful distribution platform, it would be positive for mobile game developers … [including] publicly listed online gaming developers."

Barclays said the established, publicly listed online games providers would consolidate and dominate the mainland's mobile game market.

Mobile application store 91 Wireless, however, has jumped the gun on Alibaba's new platform, which has no given launch date.

On Tuesday, the Baidu-owned 91 Wireless announced adjustments to its revenue-sharing model for this year. It will provide developers with a 70 per cent share of revenue for any mobile game that generates less than 500,000 yuan (HK$640,000) in monthly sales. For a game that earns more than 500,000 yuan a month, the share will be 50 per cent.

Ricky Lai, a research analyst at Guotai Junan International, said Tencent, the mainland's largest listed internet company, would not be as pressured because of its vast user base.

In November last year, Tencent recorded 570 million registered users for its initial batch of smartphone games on its Mobile QQ and WeChat social messaging platforms.

Internet consultancy iResearch has forecast the mainland's mobile games market to reach 25.8 billion yuan by 2016, from an estimated 11.6 billion yuan last year.