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Console Translation: Which Stocks Are Cracking The Chinese Gaming Market?

Tickers in this article: ATVI CYOU GA GAME MSFT NTES PWRD SNE SOHU

George Tsemberlis, Kapitall: China recently lifted a 13-year ban on imported game consoles. What does this mean for foreign developers?

This summer the Chinese government announced the end of the 2000 ban that kept foreign-made game consoles from being legally sold in the country.

(Read more from Kapitall: Next Gen Gaming with New Xbox One and PS4 Consoles)

While domestic-made consoles and illegal imports are easily found on the Chinese gray market, the Xbox One (MSFT) and PlayStation 4 (SNE) will be the first console generation in 13 years to challenge the $11 billion dollar a year Chinese gaming industry with the full support of its developers.

Restrictions on communications and dealing with foreign businesses have fostered a truly unique gaming culture in China. PC games dominate the market share with the most popular genre being MMOs, digital CCGs and other free-to-play games.

These genres are disproportionately popular in Asian countries, where gaming is more likely to occur in an internet café than at home. Some of the most successful Chinese games include:

  • Long Jian ������ (Dragon's Sword Online) and Fantasy Westward Journey ������������ by Netease Inc. (NTES)
  • ������������ (Eight Part Heavenly Dragon) by Changyou.com LTD (CYOU)
  • ������������ (Demi-gods and Semi-Devils) by Sohu.com Inc. (SOHU)
  • Perfect World by Perfect World (PWRD)
  • Million Arthur by Shanda Games LTD (GAME)
  • ZT Online by Giant Interactive Group INC. (GA)

���Click the interactive charts below to see quarterly sales for these Chinese gaming companies.

Many of these games attribute their popularity to the use of aesthetics and themes from romanticized stories from Chinese mythology and history, such as Sun Wukong and the Three Kingdoms period.

Activision (ATVI) was one of the first western developers to attempt an entry into the Chinese market. Blizzard’s highly successful World of Warcraft MMO was released to China in 2009 and continues today through a partnership with Netease as an infrastructure provider.

The game differs from its western counterpart in its pricing structure and content, to reflect Chinese gaming habits and cultural sensibilities. Blizzard hopes to build their foothold with the impending release of its Hearthstone CCG, based on the Warcraft universe and currently in beta.