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Shanda's performance mirrors game industry's woes

 
A display at this year's ChinaJoy trade show by Shanda Games, a subsidiary of Shanghai-based Shanda Interactive Entertainment. The company has seen a sharp drop in profits. Photo: IC

Shanghai-based Shanda Interactive Entertainment, a leading interactive entertainment media company, reported net income of 99.3 million yuan ($14.89 million) in the third quarter, down 41.17 percent from the previous quarter's 168.8 million yuan ($25.32 million), and down 77.19 percent from 435.3 million yuan ($65.29 million) year-on-year.

The company's revenues were 1.39 billion yuan ($208.49 million) in the period, increasing by 2 percent from the 1.36 billion yuan ($203.99 million) revenue of the previous quarter, and up 1 percent year-on-year.

Over 79 percent of the amount originated from its game subsidiary, which contributed 1.10 billion yuan ($164.99 million) in revenue in the period, decreasing by 14 percent year-on-year. Another subsidiary, Shanda Online, accumulated 254.4 million yuan ($38.16 million) revenue.

"Our business has experienced double-digit growth for 16 quarters. Now we think the bloodiest competition in China's Internet industry will come in two or three years. The sudden slide-down in income was due to bigger investments, a preparation for the future," said Chen Tianqiao, CEO of Shanda.?

The company has pumped huge capital into research and development, new services and new business models in 2010, Chen added.

Shanda will focus more of its attention on online-game communities, search engine technologies and location-based services in the future.

Wu Zhaopu, CFO of Shanda, said that money will continue to be ploughed back into the company in the fourth quarter.

Analysts say that China's online game industry is at a crossroad. More and more users want higher quality and diversified games, however, few domestic developers want to dedicate time and huge amounts of capital to satisfy them, since they are used to fast money.

Besides Shanda, other major game developers and operators, including The9 and Perfect World, also saw huge reductions in income and have planned staff layoffs.???

Source: Global Times

Editor: Xu Xinlei

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