While the name may not ring any bells with some western gamers, The Legend of Mir 2 (Mir 2), the 15-year-old game is well known in China as one of the games. It is actually a Korean-made game, soared to cult status in the early 2000’s as a PC game, racking up major revenue for the game’s in-country operator, Shanda games, as well as Tencent’s distribution platform.
Mir 2 is now experiencing a second resurgence, buoyed on by China’s massive appetite for mobile gaming. In June 2015 the Tencent launched the mobile version on their platform and history repeated itself, as the title once again became one of the key elements driving game revenue growth
The game, which is still operated by Shanda, was generating monthly sales between 600 and 700 million yuan ($92-108 million USD) through Tencent as of March this year, according to Zhu Xiaojing, Vice President of Shanda Games. Daily sales of the game peaked at about 46 million yuan ($7 million USD).
Turning Internet Cafes into Distributors
Shanda did one thing very well when they brought Mir 2 to China 15 years ago. They distributed the game through internet cafes at a time when personal computers weren’t ubiquitous in China, developing an online sales management solution specially designed for cafe customers.
As a startup, Shanda was working on an online social community before they were even approached by the Korean operator of Mir 2. The partners launched a commercial version of Mir 2 on the mainland in November 2001. Immediately the game gained traction in internet cafes, inspiring Shanda to market the game in cafes across China.
Mir 2 quickly became one of the most popular games in China. Shanda first hired Ubisoft, the French multinational game developer and publisher, to distribute prepaid game cards, but would soon have difficulty meeting the rising demand. To solve the problem, Shanda developed E-sales, an online software system tailored for internet cafes. Not only did it better facilitate sales, the system enabled Shanda to track data on game purchases across China and collect money in a timely manner, something that was unprecedented at the time.
In 2002 about 65% of Shanda’s total revenue was collected through the E-sales system. Internet cafes also became more willing to promote the game as they could get commissions directly through the system.
Almost all of Shanda’s revenue was from Mir 2 up until mid-2003, when the Chinese company launched their own role playing game, The World of Legend. The new game so similar to Mir 2 that the Korean developer, WeMade, sued the company for copyright infringement later that year. Despite this, the copycat prevailed. In the quarter before Shanda went public on the NASDAQ in May 2004, Mir 2 and The World of Legend generated 57% and 31% of the company’s total revenue respectively.
Transitioning From Pay-For-Access to Freemium Models
From the second quarter of 2005, Shanda began seeing revenues from online role-playing games, especially Mir 2, declining. The company concluded that the decline in Mir 2 revenue was partly attributable to “increased competition in the online game market”, and “cheating programs and pirate servers”.
To boost the popularity of its major titles, Shanda announced in November 2005 that they would offer their major titles including Mir 2 for free, hoping to generate revenue primarily through in-game items and services.This decision caused huge losses for Shanda in the following quarters, but revenues would gradually recover thanks to increases in the number of paying players and average revenue per paying account. This move revolutionized the business models adopted by Chinese games across the board.
Tencent’s Mobile Game Distribution Powerhouse
As smartphones finally became powerful enough to support massive games like Mir 2 the industry would experience a third revolution.
The distribution market for mobile games in China is totally different to what Mirr 2 had experienced as an online game. Apart from Apple’s App Store and a few Chinese Android stores (Google Play is still not available in mainland China), Tencent is one of the largest mobile game distribution channels.
In 2014, Tencent claimed it had become the largest mobile game publisher in China and one of the largest globally. It grossed 14 billion yuan and 21.3 billion yuan (about $3.3 billion USD) in mobile gaming sales in 2014 and 2015, respectively.
Before 2010 the Chinese social networking giant had only operated game titles licensed directly from developers or developed in-house. The company launched an open platform in late 2010 to allow games operated by third parties to access to their huge user base and online marketing resources.
Mobile QQ and WeChat, the two messaging apps by Tencent, now account for almost all Chinese mobile internet users. The mobile game stores on both social apps have become important game publishing platforms, and Tencent’s in-house developed payment solution is widely used by customers on the two apps. Mobile games on Tencent’s platform, including Mir 2, allow QQ and WeChat users, to log in directly without registering separately and play games with their QQ or WeChat friends. The mobile versions of many other longtime popular online games such as Zhengtu, the flagship game of Chinese game developer GIANT, are also now found on Tencent’s mobile gaming platform too.
Tencent needs these games too. While the newly emerged mobile games have relatively shorter life cycles and a lower ARPU (average revenue per user), games like Mir 2 have mechanics that are able to keep a large number of loyal, paying players.
Blurring The Lines Between Gaming And Entertainment Content
Mir 2 could now already be looking at a fourth resurgence, as the popularity of entertainment content has rocketed among VCs and tech giants. Shanda Games plans to adapt Mir 2 and other core titles of their Legend series to new formats, including movies and drama series.
Chinese tech companies behind longtime famous game titles, including Tencent, are working on adaptations based on their games to ride the rising tide of China’s entertainment content industries. Foreign gaming companies are also eyeing China entertainment market too. The movie based on smartphone game Angry Birds reportedly grossed 195 million yuan (roughly $30 million USD) in box offices during the three days following its China release earlier this month.