Corporate ChinaMicrosoft late again to gaming market with new JV
Microsoft's new gaming joint venture with BesTV is likely to fail due to its late arrival to a highly competitive sector dominated by local players
After years of being locked out of China's lucrative gaming market, US software giant Microsoft (Nasdaq: MSFT) may have finally found an opening through a new joint venture with BesTV (Shanghai: 600637), the digital arm of the nation's second largest media company. On the one hand I should congratulate Microsoft for its tenacity in pursuing China's electronic gaming market, which is one of the world's largest. But on the other hand, I have to return to one of my common refrains about the world's biggest software maker in observing that this effort looks a bit late and will have difficulty finding an audience in China's highly competitive gaming market. I also have my doubts about the selection of BesTV as its partner, but I'll come back to that later.
Microsoft, Sony (Tokyo: 6753) and other gaming console makers have been locked out of China for the last decade due to strict government controls. Beijing ended the ban in July, saying foreign-made consoles could be allowed into the market if the companies set up operations in a new free trade zone being launched later this month in Shanghai and agree to let Chinese censors vet their games.
While this new joint venture could indeed open the door for Microsoft to sell its Xbox consoles in China, it's far from clear that it has such plans with this venture. For starters, BesTV provides digital video services over traditional cable TV networks and has little or no experience with gaming consoles. That means we're far more likely to see the pair modify some of Microsoft's existing Xbox titles for use over BesTV's existing pay TV networks. That would make far more sense anyhow in China, since offering games online helps to minimize the potential for piracy that is rampant in China.