'Tis the season for 2010 financial year end results of Chinese online game operators. Niko is closely monitoring the results to use as one of many inputs for our 2011 Chinese Games Industry Annual Review and Forecast Report, due in April. The MOC has published a 2010 market size (as well as a report on I-cafés, which they count to be 144,000 in 2011) and GAPP stated it's own version earlier in the year. We'll wait for the results and our own 70,000 points of primary data from 10 Chinese cities before we weigh in on the market.

Foreign companies are perpetually frustrated by regulations in China's games market. While we hope the situation improves and regulations change to welcome foreign games and game companies, meanwhile there may be a way for foreign brands to get some revenue out of Chinese online games. We have seen very slow and small penetration of in-game advertising in Chinese online games, particularly in the MMORPGs whose storylines do not match well with current day consumer products. Some games might fare well with the inclusion of virtual items that are licensed from brick-and-mortar businesses. Case in point: Hilton Worldwide has licensed its brand to Perfect World to use on a hotel in the game Hot Dance Party. We have heard inquiries about online games from other consumer brands as well, and we know that games for mobile devices will need to incorporate advertising revenue in order to survive. Watch for more foreign well-known brands to enter Chinese games and take some revenue from the market after all.

American game companies have not taken a hard stance about unfair trade with China, but it seems the USTR and congress are gradually taking matters into their own hands. WTO rules do not ban censorship, but more and more Chinese online game companies are establishing business channels in the US and the increasingly trained eye of USTR might take notice on its own without a commercial request from the US game companies that have not taken any action or made any such requests on their own.

Even though there is now a curfew on online games at 10PM in Vietnam, teenage online gamers still get their fix during the day. It seems the true losers in this deal are the Internet cafés (some are abiding by the curfew and losing money, while others are shutting their doors and pretending to be closed), because gamers are playing for multiple hours in the day or before 10PM. Surely the online game operators would prefer for the curfew to be lifted, because in most Asian markets the hottest time online for games is 10PM-1AM especially for professionals who do not have free time during the day.