China's Shanda Games Sees Revenue Increase, Profit Dip

Major Chinese-headquartered online game publisher Shanda Games announced a 10% revenue increase, but a 16% decrease in profits to $44.8 million in the second half of 2010. Overall, net revenues for the firm, which is one of China's largest in terms of MMO and casual web game operation, increased 4% quarter-over-quarter and increased 10% year-over-year to RMB1,362.5 million (US$200.6 million). However, due to increased costs, Shanda saw profit decrease to RMB304.3 million (US$44.8 million), compared with RMB363.2 million ($53.5 million) in the company's quarter ending June 30th, 2010. Active paying accounts for the free-to-play online MMOs that the company operates in China, which include Aion, Maple Story and Ragnarok Online, were essentially unchanged from the first quarter of the year. The average revenue for each MMO account fell by nearly one percent, though, leading net revenues for the MMO segment of the company to drop by four percent year-over-year, to RMB1,015.4 million ($149.5 million). Net revenues for the company's casual games holdings also fell by roughly one percent, to RMB71.4 million ($10.5 million) Shanda's January acquisition of game advertising/virtual currency firm Mochi Media led to a significant increase in the company's "Other Revenue" line item, which notably increased to RMB26.8 million ($3.9 million), a 270 percent increase over the same quarter last year The firm commented on increased costs that, in particular, "research and development expenses increased sequentially mainly due to increases in outsourced R&D and investments in independent game development and operating studios through 18 Capital during the second quarter of 2010." Research and development expenses represented 9.7% of net revenues, compared with 6.2% in the second quarter of 2009. In announcing the earnings, which Shanda CEO and Chairman Alan Tan said were in line with expectations, Tan said the company was "very encouraged by the recent launch of the Mochi China website and its nation-wide competition to attract top game developer talent to add more quality mini games to our platform." Today's earnings report accompanied yet another acquisition for the Chinese gaming conglomerate in Korea's EyeDentity Games, developers of popular free-to-play MMO Dragon Nest. Nexon has previously announced plans to publish the game in North America in Spring of 2011.