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Market Insight

Tencent's deal with Namco Bandai implies a tentative cooperation mode with Japanese companies

January 24, 2013

Chenyu Cui Chenyu Cui Senior Research Analyst – Games, IHS Markit
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Tencent, a China-based online gaming company, has signed a deal with Namco Bandai to co-develop a new web browser-based online game adapted from popular Naruto manga and anime series. Cyberconnect2, famous for the development of Naruto Shippuden Ultimate Ninja Storm on PS3/Xbox 360, will join the new game's development process as well. This game is expected to be released at the end of 2013 in China only. This is the first time Namco Bandai will be involved in the development of PC based online games and Tencent will be its first partner in China, to explore the market jointly. 

Since the government restricted the entry of console games to China in 2005, Japanese gaming companies have faced various obstacles to exploring the market and to building partnerships with Chinese companies. Licensing existing PC online games used to be the first choice for Japanese companies to step into the Chinese online gaming market, but Final Fantasy 14 and Monster Hunter: Frontier Online have suffered localization and legal problems in succession.

With the rise of mobile internet, mobile gaming has become another opportunity for partnerships between companies of the two countries. However, premature payment habits of Chinese mobile gamers make it difficult to monetize in the short term. Tencent's deal with Namco Bandai for the development of browser games might provide a new cooperation mode as co-development will reduce the cost of post-localization and legal risks compared with licensed games, and browser games require shorter development cycles and looser legal supervision compared with client games. 

Practically, the manga-adapted online gaming market is beset with piracy and as a result legitimate and popular adapted online games have never existed. In respect of Tencent, this decision for the manga-adapted game to be browser-based instead of client-based could guarantee that the game be launched as soon as possible in order to get an essential market share in this categorized market. Saint Seiya Online, a client MMO role playing game via Perfect World, is in its first technical testing and Dragon Ball via Shanda has had no news since the company got the licensing deal in 2011. If Tencent could impress the market with a high-quality game and be able to attract the existing huge amount fans of the original manga, it is easier for the company to expand its market share by launching other manga-adapted online games as Tencent has a strategic partnership with Shueisha for its manga portfolio including One Piece, Gintama, and so on.

However, the prospect of this success relies on the popularity of this new game and Tencent will face diverse challenges in order to achieve success. For example, some manga series have been adapted to console games and have become deeply rooted in game players (Chinese gamers can buy TV consoles and handhelds from the grey market), and as a result, how to compete with the existing games by taking advantage of the PC device poses a difficult problem.

Geography
China Japan
Organization
Bandai Namco Tencent
Research by Market
Media & Advertising
Category
Games
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