Tencent to benefit as XBox grabs pole position in China

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br xbox Bloomberg An Xbox One on display during the launch event in New York in November last year. Chinese citizens can now pre-order the Microsoft console after Beijing lifted a 13-year ban. Photo: Bloomberg

Lulu Yilun Chen Hong Kong

It is game on in China, as Microsoft’s Xbox One becomes the first entertainment console to hit the market after the end of a 13-year ban.

Microsoft began taking orders yesterday for its newest game console from online retailer JD.com via Tencent Holdings’s mobile messaging applications.

The pair of Chinese internet companies held exclusive rights to pre-sell the locally made Xbox One until tomorrow, JD.com said. The console is due to ship nationwide in September.

Tencent shares rose 3.2 percent in Hong Kong yesterday.

Microsoft was the industry’s first big player to start production in the country after the Chinese government last year allowed console sales in the new Shanghai free trade zone and opened up an estimated $10 billion (R105bn) market.

The Xbox did not even exist in 2000, when the Communist Party banned game systems over concern they would be bad for children. Microsoft released its first such console a year later.

“The potential market for Xbox in China is huge; there are a lot of prospects for growth,” said Bill Fan, an analyst at China Securities in Hong Kong. “Tencent could co-operate with Microsoft on games in the future, and Xbox can utilise Tencent and JD.com’s distribution channels to generate more sales.”

The Xbox One pre-orders on JD.com require a deposit of 499 yuan (R850) and will be available only to those who use the Chinese versions of Tencent’s WeChat and QQ mobile messaging apps.

JD.com spokesman Josh Gartner would not disclose the number of Xbox One consoles the company was selling or the price.

JD.com said it would begin accepting pre-orders for the new Xbox through its website and its exhibition booth at the ChinaJoy Expo in Shanghai on Thursday.

Consoles were included on the list of items to be liberalised before Shanghai’s free trade zone was created in September last year.

At about the same time, Microsoft formed a $79 million joint venture with BesTV New Media, a unit of Shanghai Media Group, to begin making Xbox consoles in the free trade zone for the Chinese market.

BesTV invested $40.3m for a 51 percent stake in the enterprise, while Microsoft put in $38.7m, according to a September filing.

The State Council, China’s cabinet, has since temporarily lifted the ban nationwide and announced plans to draft new rules on their sale. The country’s video game industry will generate about $10bn in sales next year, according to auditing firm PwC.

Sony has similarly agreed to form two ventures with Shanghai Oriental Pearl to start making PlayStation consoles in China.

Nintendo planned to expand in emerging markets with new devices starting next year, the company’s president, Satoru Iwata, said in May.

Microsoft has been chasing Sony for dominance in the US console market.

Duncan Clark, the chairman of technology consultancy BDA China, said Tencent and JD.com were well positioned to benefit. “For Xbox, Tencent is the most established games distributor, and, for JD, it’s logistics, shipping and quality control,” Clark said. “So it makes a lot of sense.” – Bloomberg


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