Unlocking Asia: breaking into the next growth market

BERKELEY, Calif.--Japan has been a key gaming market for decades, but game sales there have slumped in recent years. In the near term, there are more opportunities for growth elsewhere in Asia. A panel at Saturday's annual BerkeleyMBA Asia Business Conference discussed the challenges and rewards US companies might find as they pursue these opportunities.

The four panelists brought a wealth of perspective to these questions. Electronic Arts' vice president global online Lars Buttler (along with EA's online and Asia publishing teams) coordinates the company's entry into Asian markets, with a particular focus on China. Mike Cassidy, CEO of Xfire, recently launched his firm's gamer-specific social-networking software in Korea and is working on plans to enter China. Tom Edwards has spent more than a dozen years as a geopolitical strategist for content-localization issues in the software industry. He is the owner of Englobe, a consulting firm that helps global businesses address cultural sensitivities in local markets. Finally, Sandra Myers, a global business development executive at IBM IGS Digital Media, is developing IBM's online-gaming business worldwide, with a focus on providing content-delivery infrastructure to publishers and developers.

The panel opened with a general question to get the ball rolling: How do you see gaming changing in the future? The panelists brought up two key points: more social interaction and a greater variety of platforms.

Edwards suggested a future of massively multiplayer games, where thousands of gamers collaborate to stage large-scale events like online reenactments of historical battles. This idea jibes well with Cassidy's blueprint for the future, in which social interaction and community--Xfire's stock in trade--play an even larger role than today. Myers mentioned two evolutionary changes that she believes will lead to market growth by attracting nontraditional gamers: a wider range of content and greater use of mobile handsets for gaming.

Buttler tied the other panelists' comments together, noting, "There's no question that gaming is becoming a mass-market experience." He cited the success of EA's casual gaming service Pogo.com among women over 35. Buttler followed this by quoting an internal EA slogan that neatly summed up and expanded on the key points in the preceding discussion: "Seamless content, community, and commerce across platforms." It's notable that four panelists from different companies and areas of focus were in such close accord. This lends credence to the notion that they're correctly predicting the direction of the industry, not just speaking to the plans that are under way at their respective employers.

But the idea of cross-platform content and communities in the context of a panel on Asian gaming begs a question. What about taking that content and those communities across borders? The language barrier is a tricky problem, and at the moment, one with no true solutions. Edwards suggested that improved machine translation might help but noted that the technology will not be available for some time. Xfire's Cassidy commented that, in his experience, international online communities respond to the language barrier in one of two ways: They default to English (sometimes a kind of pidgin gaming English), or they offer foreign-language-specific servers or matches. Both are workable stopgaps, but they don't help build the international online community that a more comprehensive solution might bring.

The panel then turned more specifically to the Chinese market. China is notorious for piracy, a fact that prompted Myers to note that one of the key challenges in the market is creating effective digital rights management technology to "protect your IP (intellectual property) so that you can extract value."

Interestingly, other panelists had a slightly different take on what it meant to "protect your IP." Both Cassidy and Buttler place a high value on the quality of the online experience. If a new player repeatedly loses to a more experienced gamer, or--even worse--if someone cheats, it's only a matter of time before the new player gives up and switches to a different game. As a result, effective matchmaking is a priority, and so is building a strong user community. As Buttler put it, when players have good in-game relationships, "people feel strongly about cheating on their server" and will serve as the first line of detection and defense against cheaters.

Speaking with GameSpot after the panel, Edwards noted another key challenge of selling games in China: censorship. The Chinese government screens content, blocking the import of software it considers inappropriate. However, the process of determining whether a game is "healthy" or not--the government's stated standard--is highly unpredictable. In his words, the government imposes "strong restrictions without clear guidelines." It's an important issue to be aware of, though a bit ironic given that China's software pirates are not nearly as scrupulous. "When a company releases something in the US, it's on the street in Beijing tomorrow--or even faster," after making an end run around Chinese customs.

To get beyond these unpredictable import policies, as well as to foster cultural compatibility, we may see more US companies imitating EA's decision to develop in China for the Chinese market. Online gaming in Asia, especially in China and Korea, is a fast-moving, high-growth market with key differences from the US. It will be interesting to see how US companies innovate to succeed in these markets over the next few years.