As a fan of console games and the owner of a legit, non-hacked Xbox 360, I have a tough time in China. Because consoles are banned here, it’s very difficult to find legit copies of games. Most gamers just purchase hacked gray-market consoles that run pirated game discs. This shouldn’t be a big surprise, given that the pirated games tend to cost less than $1 apiece, a far cry from the $60 a new game costs in the US. The downside of this is that hacked consoles can’t be used online — Microsoft is pretty good about spotting and banning them remotely — so the average Chinese Xbox gamer is missing the entire online experience.
And while it might seem like that’s an insignificant number of people, it isn’t. Certainly, console gaming is far less popular in China than PC gaming, especially if you don’t consider the Wii. But according Lisa Hanson of Niko Partners, a research firm that tracks video game markets in Asia, the number of Xbox 360 users in China isn’t insignificant at all. Back in 2009, she estimated that over 600,000 360s had been brought into China and sold over the previous year. I got in touch with her myself via email to see if she had any newer numbers, and while she didn’t have any specific Xbox numbers, she did tell me: “Last we estimated there were about 1.7 million grey market console sales per year in China.”
That number is down from previous years — there were 2-3 million console sales in China in 2008 — which shouldn’t be surprising that current gen consoles are starting to look a bit long in the tooth. But it does indicate that even now, hundreds of thousands of Chinese people are likely buying hacked Xboxes each year. The total install base for China must be at least 2-3 million, which means that Microsoft and third party developers are missing out on big chunks of change since they don’t net anything from pirated game sales. The Chinese government is also losing a lot of potential money it could make by taxing the import and sale of these consoles and games.
Go East, young man. Then go digital.
Assuming that the the government is unwilling to reverse its mostly nonsensical and ignored console ban, though, there is one thing I think Microsoft could do to open up at least a small stream of revenue from China: enable day-one downloads of all Xbox 360 games via the Live Marketplace. Although most Chinese gamers are likely to balk at the thought of yearly subscription to an online service on top of what will seem like exorbitant prices for new games, Microsoft can almost certainly convert at least a small percentage of Xbox users who would be willing to pay the extra money for the privilege of being able to play online and getting access to the games they want quickly, easily, and reliably. And according to a very recent Niko survey, nearly two-thirds of Chinese gamers are paying to play, so the conversion rate might not be quite as low as some might suspect.
Of course, there are also a lot of reasons why this wouldn’t work: Mircosoft would need to add support for some kind of Chinese payment system like Alipay to even have the hope of attracting anyone but the most dedicated customers. Then there’s the fact that many of these games aren’t properly localized, although many of the popular games do have Hong Kong localizations that could be made accessible to mainland gamers as well. The biggest obstacle is the price, and with plenty of free PC gaming options to choose from, there’s not exactly a huge demand for online Xbox gaming here.
That said, it’s not all about China anyway. Digital distribution is the future. No, scratch that, digital distribution is the present, and even the past. In a world where Steam has been serving PC gamers the world over with day-one game downloads for years, it’s ridiculous that Xbox gamers still have to worry about tracking down a physical disk. Moreover, digital distribution gives Microsoft total control over the distribution of games, eliminates supply issues, and cuts used game retailers out of the picture entirely. Why wouldn’t Microsoft want to do this?
Of course, the short answer is that they do. There are already rumblings that the next generation of consoles — which we likely won’t see for at least another couple years — will have more thorough digital delivery options, but it’s already possible to buy and download some full games via the internet right now. Why doesn’t Microsoft allow more games to be downloaded directly? Probably because of the complex web of agreements it has with third party developers, publishers, and retailers that stock its console.
I know my dream of day-one downloads of new games is just that — a dream — until at least the next console generation. But seriously, Microsoft (and Sony), give it some thought. If it works for Steam on the PC, it can work for you on a console. And while you’re not about to start making billions from Chinese gamers as long as your systems remain technically illegal here, China might add a little something to your revenue stream! I know I would spend more money on buying legit games from China if that process didn’t require me to import them myself from the US (slow, a pain) or try to find a trustworthy Taobao vendor who has imported one themselves (slightly less slow, but still a pain, and expensive).