Can China produce a game studio like SuperCell?

Can China produce a game studio like SuperCell?

October 11, 2013

by Francisco Yu

When the DreamWorks animated movie Kung Fu Panda released worldwide, many in the Chinese movie and animation industry asked themselves why couldn’t a Chinese studio have created Kung Fu Pandafirst. After years of soul-searching and introspection, the Chinese animation industry has been trying (and failing) to meet that bar of creating an equal or greater animated film. The creative and decision making mechanisms of the industry just aren’t conducive to making a global animation hit yet.One can understand why a Grand Theft Auto-type console game cannot be made in China since the consoles themselves are banned for sale in the domestic market and the investment in time, expertise and resources for creating a console game is beyond the production skills and ROI of many Chinese game companies. However, China should be able to create fantastic mobile games due to the size of the domestic market and the abundant skill and expertise of Chinese developers in creating mobile and web games.

Supercell of Finland, creators of Hay Day and Clash of Clans, both best-selling mobile games and a shortlist contender for one of the best mobile game developers in the world monetizes its games using the freemium model that Chinese games are famous for. Aside from being one of the most lucrative money-making games for mobile, both games (on iOS) are known for having excellent production quality and a deep attention to design and playability. The question for Chinese game developers is can they aspire to become a SuperCell of China? That implies having best-selling games that look and play great but also have global appeal, not just appeal in China.

I would say the answer to that is probably not in the next 3 years. It is not a matter of lack of skills or a poor talent pool of developers and artists. China has both in great abundance. What it does lack is an industry structure that promotes quality over a quick ROI. In a highly competitive field of China distribution and sales, studios have no choice but to release quickly and make a return. Developing a game in a timely manner to catch a genre wave and to release another game quickly as competitors copy or crowd the market is the norm. Investment into researching innovation and creating a quality product will quickly lead to a bankrupt studio as the need to ship product and convert users into cash becomes imperative for survival.

Another reason is that some of the most talented and skilled developers and game designers will realize that in some cases, working in China or in the Chinese game industry is not only tough but stifling. Probably one of the most talented game designers in the world today is Jenova Chen, the founder of the innovative game studio That Game Company. Although born in China and educated in Shanghai, he really found his market and his calling in the US. He might have been successful in China as well, but it seems less likely that he would not have gotten the freedom to design the vision of his games in China, which requires a greater attention to the bottom line of revenue baked into the fundamental game design from the very start of game development.

One of the strongest benefits of working in the West is the community of independent game studios that have alternate funding options like Kickstarter or self-publishing. In China, those options are more limited as the channels for distribution and marketing almost all require some partnership with a platform or portal to get the game noticed, downloaded and monetized. The West’s community of independent developers creates a pool for AAA studio refugees to flee to or even be hired from. Ideas and concepts that may not have an immediate multi-billion dollar revenue projection can still percolate and help keep the industry refreshed. Unfortunately, the independent game community in China is far more challenging given the concentration of the market controlled by the established game companies and their platforms.

Somewhere in China today, there are potentially hundreds of future Shigeru Miyamotos and studios that can become the SuperCells and the Blizzards of the future. Just don’t expect it anytime soon given the state of the Chinese game industry and the short sighted and myopic expectations of the industry.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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