Microsoft launches search for Chinese game hits in race against Sony

Microsoft launches search for Chinese game hits in race against Sony

HONG KONG, Oct 25 (Reuters) – Microsoft Corp (MSFT.O) is sourcing Chinese video game content to emulate Sony Group Corp’s (6758.T) success with “Genshin Impact”, sources said, reinforcing China’s transition from a gamers-only country to a successful developer hub.

The American software giant and the Japanese tech vanguard have been offering a lot of money to small developers for a few years to develop licensing programs and titles, but the impact of “Genshin Impact” has added a sense of emergency, sources said.

Budding Shanghai studio’s action role-playing game miHoYo has generated billions of dollars since its release two years ago and has raised the bar for multiplayer, cross-platform gaming – the kind of sources Microsoft and Sony seek. in China for their game. Pass and PlayStation Plus subscription services.

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The West’s growing interest in Chinese games reflects a maturing of China’s game development industry, analysts said. Chinese games are now on par with big-budget Western games, said Daniel Ahmad, principal analyst at Niko Partners.

“Chinese game developers are trying to standardize their development tools, create advanced production processes, invest in super-scale teams,” Ahmad said. “Ultimately, this gives them a competitive edge in reaching large audiences both in terms of geography and platforms.”

Microsoft has set up a team to research Chinese games, two industry sources said. The Xbox maker has mostly filled its subscription slate with titles from big brands, but is now even courting independent studios with big-ticket deals, they said.

At the same time, filings showed that Microsoft was extending its subscription service to personal computers and portable devices, increasing the appeal of Chinese developers such as miHoYo who have developed a reputation for multiplayer and cross-platform compatibility – with ” Genshin Impact” being a prime example.

An executive, whose studio signed a licensing deal with Microsoft three years ago to bring its game to Game Pass, said the US company had recently offered a licensing deal several times larger for a sequel.

“We are not signing him yet because we believe that when we finish our game he will get an even better offer,” the exec said.

Illustrating the money involved, the filings showed that Microsoft paid $2.5 million to bring action game ‘ARK: Survival Evolved’ to Game Pass and $2.3 million for the sequel ARK 2 – all two from American developer Studio Wildcard, owned by Chinese Snail Games.

An executive from fellow developer Recreate Games in Shanghai said his company signed a deal with Microsoft last year for its upcoming multiplayer title “Party Animals” to launch exclusively on Xbox.

“Xbox has approached many projects in China, and these projects mainly focus on developing games for consoles and PCs,” said general manager Luo Zixiong.

Microsoft did not respond to email requests for comment.

PLAY CATCH-UP

Microsoft has been slower to get started in China than Sony. The Japanese firm launched the “China Hero Project” game accelerator program in 2017 to help Chinese developers publish games on its PlayStation. It supported 17 titles of which seven reached the market.

“We have been silent for the past two years. But the program continues to operate,” Kuangyi Zhou, former director of the China Hero Project, told Reuters in April. “We’re proud of all the games that have successfully come out of the program… There’s no doubt that a new batch is coming.”

In 2019, Sony teamed up with miHoYo, a little-known studio that was developing “Genshin Impact.” The game – a global hit when released a year later – is available for personal computers and handheld devices, but the console version is exclusively for PlayStation.

Microsoft regretted missing out on “Genshin Impact,” two people familiar with the matter said. He spoke to miHoYo early in the game’s development but didn’t make a deal, one said. The other person said the experience was driving Microsoft’s more active pursuit of Chinese developers.

“Resuming ‘Genshin Impact’ made Sony a lot of money,” the second person said, declining to be identified as the information was not public.

There’s no public data on Genshin Impact’s console revenue, but data from Sensor Tower puts the figure at $3 billion for mobile devices in May.

EVOLUTION OF MARKET

For much of the 21st century, Chinese gamers mostly played imported titles, as local games were considered to have lower production value. Even Chinese gaming leader Tencent Holdings Ltd (0700.HK) has started publishing foreign games at home.

As the market became the largest in the world, local studios increasingly invested in developing higher quality games. The trend accelerated with regulatory restrictions on new games and limits on the number of imports, and benefited from the return of engineers who had worked at top studios such as Ubisoft Entertainment SA (UBIP. PA) and Activision Blizzard Inc (ATVI.O).

Game executives now point to “Genshin Impact” as a global industry milestone, praising its production value and seamless cross-platform play. Apple Inc (AAPL.O) even used the game to demonstrate the power of its high-end devices, including the new iPad Air featuring its latest M1 processor chip.

Another milestone was 2021’s “Naraka: Bladepoint” from NetEase Inc (9999.HK), the second-largest game company in China. While most Chinese titles are free-to-play and profit from in-game sales, ‘Naraka: Bladepoint’ has sold over 10 million copies despite its $20 price tag, reflecting confidence in its production value. .

The game has caught the attention of Microsoft and Sony, two sources told Reuters. One said NetEase prioritized Microsoft, which made the game a Game Pass exclusive in June.

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Reporting by Josh Ye; Editing by Christopher Cushing

Our standards: The Thomson Reuters Trust Principles.

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