Earnings call transcript from Chinese gaming giant

Here’s a link to the transcript:


And here are a few highlights – note that these are Chinese-only numbers:

First, I would like to present a quick overview of the key financial highlights for Q4 and FY 2006. Net revenues for Q4 2006 were $36.2 million, representing 21% QoverQ growth. Net income was $13.5 million for earnings of $0.54 per ADS for Q4 2006. For FY 2006, net revenues were $126.3 million, representing 112% YoverY growth. Net income for FY 2006 was $14.0 million, or earnings of $1.63 per ADS.

Stunning growth rates, even when compared with the global growth rates I have posted previously

For Q4 2006, WoW’s peak concurrent users was over 680,000 and the average concurrent users was 340,000. As of December 31, 2006, approximately 6.8 million accounts had been registered and activated for the WoW game in mainland China.

Last I heard, WoW was at 7 million globally.  Now they’re approaching that in China alone.  Yowsa.

As you may know, Blizzard Entertainment launched the highly anticipated expansion pack for WoW, The Burning Crusade, on January 16, 2007 and has broken day one sales records in North America and Europe. We are very encouraged to see the strong DPO[?] of the Burning Crusade in overseas markets and we are very excited to bring this expansion pack to mainland China.

We have started to prepare for the launch of the Burning Crusade in Mainland China, including content localizations, server arrangements and so on. We currently estimate that the Burning Crusade will be launched in Mainland China by the end of Q2 2007.

Oh, I’m sure they’re making that expansion pack available there as fast as they possibly can.

For Guild Wars, we started limited open beta testing January 19, 2007 and so far the demand is high. We plan to commence full scale open beta testing for Guild Wars by the end of Q1 2007, after the Chinese New Year holiday.

Pepsi Cola is our co-marketing partner for the Guild Wars games. During the limited open beta testing, we distributed Guild Wars game account through Pepsi’s nationwide internet testing channels and we will hold Pepsi-sponsored Guild Wars tournaments and other marketing campaigns in the coming months.

Partnering with domestic or international famous brands to conduct marketing and promotion efforts has been proven to be one of our most important marketing methods to promote online games. Many renowned brands of different industries have shown interest in our strong game pack line, and we are currently in discussions with them to explore potential cooperation opportunities.

Very interesting, and a marketing approach I will look into more.  Think about the implications of “Pepsi’s nationwide internet testing channels” in China.  I think I’m gonna buy some Pepsi stock.  No joke.

Now let me update you on our proprietary in-house developed games. Joyful Journey West is generating small but stable revenue streams since we launched the shopping mall function for the game in September 2006. Fantastic Melody Online, also known as FM Online, a 3D zone action-based MMORPG that we developed through outsourcing arrangements, is estimated to launch in the second half of 2007. In addition, we have another two MMORPG titles that are currently under development.

Note that they are generating revenue from a “shopping mall” in the game.  Like it or not as a gamer, it’s something that’ll be ubiquitous before long.  Also consider that with a proven online market this large in China (see the numbers above), funding and developing top shelf games in and for that market first is a no-brainer.


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