According to Shanda's Q4 earnings release, company Non-GAAP net revenues were RMB 1,081.7m ($172.1m), presenting a significant yearly decrease of 20.2%. Its online gaming revenues from the Chinese market were RMB 976m ($155.3m), down 3.8% quarter-over-quarter due to the weak performance of Mir series and Woool. Revenues from overseas markets offered strong growth but from a smaller base, with revenues up 61.3% quarter-over-quarter to RMB 105.5m ($16.8m) thanks to Dragon Nest in western markets and mobile game Million Arthur in South Korea. Despite the overall decreasing annual financial numbers, its average monthly active users (MAUs) and monthly average revenue per paying user (ARPPU) has increased 1.2% and 1.1% quarter-over-quarter, respectively.
In Q4, Shanda was eclipsed by the performance of Changyou within China for the first time due to its sluggish domestic market performance, but the company still ranked in third position behind Tencent and NetEase in terms of total online gaming revenues as significant growth in overseas markets made up for this quarterly decline in the domestic market. It was still Dragon Nest that made the major contribution to Shanda's overseas growth in Q4, but Million Arthur, an online mobile card game, developed by Square Enix and operated via Shanda's subsidiary Actoz in South Korea since December 20th 2012, has demonstrated the ability to generate significant revenue through its current performance in South Korea and Japan (operated via Square Enix). As Rift will not launch open beta testing phase until the end of March 2013, Million Arthur is estimated to be the major source to drive Shanda's Q1 revenue growth in 2013 and we estimate that monthly revenue of the game could reach RMB30m based on the historical success of other mobile games.
It is no secret that Shanda will launch Million Arthur in Greater China and other Asian markets in 2013 to generate more revenues; however, the complexity of Chinese mobile gaming market and the relative backwardness of the mobile network connectivity might pose challenges. Also the success of Million Arthur does not indicate the success of Shanda's other upcoming titles including the Final Fantasy series. Million Arthur is developed exclusively for the mobile platform so the play mode, game controls and graphic design are in line with smartphones and habits of smartphone users, while other titles transformed from existing client MMOGs might find it challenging to fit the new device well without weakening original game experience, resulting in some lost retention and monetisation.
Regardless of the potential risks, Shanda's mobile gaming business, to some extent, is expected to help the company survive the continuous decline in its traditional MMOG operation, and will be another major strategic focus beside Rift in 2013. The major revenue of mobile games could be generated from overseas markets instead of the domestic market.