Online games - the rise of creative industries in Asia
Online games – the rise of creative industries in Asia
The service industry has become the most important part of GDP in all of the world’s most advanced economies. In Asia this transformation of moving from a manufacturing based economy to become a service dominated economy has been a raid process. With technological development such as the internet and global communication, new forms of service industries have risen within what is often called the creative industry. The computer online game industry is one of the most important examples. During the last decade this industry has grown rapidly with worldwide online game revenues increasing from 2.3 billion USD in 2003 to 8.1 billion USD in 2007. East Asian countries have been at the fore front of this development and account for more than half of the global market. Korea is the most prominent leader in the region, but in recent years China has also rapidly become an important actor within the industry with its massive domestic market. Japan, on the other hand has continued to be the leading country regarding console games, with global firms like Nintendo and Sony.
A travel grant from SSAAPS, the Swedish School of Advanced Pacific Asia Studies, gave us the opportunity to study the development of this industry in South East Asia. We have been able to interview actors within the industry in Korea, China and Japan. The project aims at establishing new knowledge of the growth of the industry and the internationalization of the most important companies. During the project we have been able to study firms in China, Japan and Korea to be able to compare the different market structures and incentive programs from the government. The industry is characterized by being at the intersection of products and services. In order to establish revenue the company must grow a long-term relationship with the players, who can pay either through subscription or by purchasing items within the games.
By shielding its domestic market from Japanese consoles games through trade barriers in combination of promoting the world’s best broad band network and IT skills, Korean firms have become the leaders in the regions. They also get strong support from government agencies that promote this creative sector as a new export industry. Export growth goals have been reached well ahead of predictions and Korean companies have been very active to internationalize their organization. Korea really sees the opportunity in promoting this creative sector on the global market. In the ongoing economic recession, the industry grows consistently. It is by far the biggest creative content export success in what has been called the “Korean Wave” in Asia.
China has moved from a market where international firms dominated the sector to a situation where domestic Chinese firms now are the leaders. The biggest firms are publicly traded and have started to actively go abroad. In China, the paradox of internet, control of content and technical development has been evident. It is clear however, that the Chinese government sees the potential of this rapidly rising creative high-tech service industry. It is a sector that can help China to move away from only “manufactured in China” to “created in China”. The development of this specific industry suggests that new entrepreneurial companies in China and Korea have the potential to become important international players in new creative industries when a strong domestic lead market, skills and IT infrastructure are present.
Japanese companies are still mostly focused on the console market. Recent success of Nintendo Wii has helped to consolidate this market. However, these platforms are also increasingly moving towards the possibility of playing online.
The future challenges that have become clear through the project are how the companies will handle the complexity of internationalization and how to tap into global centre of competence. In addition, the possibility of playing games on multiple platforms such as mobile phones, consoles and computers is a technical challenge.
This sector is still under-researched and a lot of interesting aspects in relation to location, internationalization and economic structure of the virtual markets exist.
Dr. Patrik Ström, Pro Futura Fellow Dr Mirko Ernkvist
Both active at the School of Business, Economics and Law, Göteborg University