In the latest of Gamasutra's regular China Angle columns, Pacific Epoch's Shang Koo investigates the local rural gaming culture in Shangri-la, and looks at rumors that Netease's MMO Westward Journey 3 might not be the massive hit that its predecessors were. The Most Popular Game In Utopia Is: October 1 is Chinese National Day holiday, kicking off a seven day long mandatory vacation week across the country. I took advantage of the break and headed to China's Yunnan province, home of the official Shangri-la. When James Hilton wrote his novel Lost Horizon in 1933, Shangri-la was still a fictional utopia isolated from the outside world. In 2001, Zhongdian county in Yunnan province renamed itself Shangri-la, hoping to bring tourism to the isolated county. Despite the influx of tourists, Shangri-la still lacks the McDonalds or Starbucks found in first and second tier cities (or copycats found in lower tier cities). However, the county has not been left behind by the information revolution, as evidenced by the dozens of well maintained Internet cafes. Where there are Internet cafes, there are gamers. World of Warcraft (WoW) is the top game in Shangri-la, followed by CounterStrike. Interestingly, a large proportion of WoW players had Tauren characters, whose homeland Mulgore has an eerie resemblance to the local area. After two years of operation in China, finding World of Warcraft in geographically isolated Shangri-la is no longer a surprise. On October 4, Blizzard and WoW's operator The9 jointly announced that WoW reached 800,000 peak concurrent users (PCU) after the expansion pack The Burning Crusade was launched. The PCU number still places WoW third among MMORPGs in China, behind domestic games Fantasy Westward Journey and Zhengtu both with over 1 million PCU. Both games claim a large portion of their user bases from rural markets and lower tier cities. The popularity of WoW in remote Shangri-la shows that WoW's lower penetration in lower tier markets (relative to Fantasy Westward Journey and Zhengtu) is a matter of income level rather than geography. Despite Shangri-la's remote location, the county is relatively wealthy. In addition to the wealth created by growing tourism, many residents also receive government subsidies based on both ethnic minority status and the county's high elevation. The additional wealth allows Shangri-la's tour guides and yak herders to pay a premium 0.45 Yuan per hour for WoW in China, whereas most other MMORPGs in the country have shifted to virtual item based free-to-play model. Three Strikes... Early rumors for Netease' new MMORPG Westward Journey 3 do not sound promising. One "insider" claimed the game's concurrent user number has dropped from a high of over 200,000 during open beta testing to around 50,000 after commercialization. A Netease spokesperson has denied the rumor and claimed the game retained more than 100,000 concurrent users after commercialization. Irregardless of the conflicting concurrent user numbers, Westward Journey 3 seems unlikely to live up to its hype. The game was slated to replace Netease' first successful MMORPG Westward Journey 2, a five year old game which continues to record around 500,000 peak concurrent users. Netease intended to migrate Westward Journey 2 gamers to the sequel, thus reversing the slow but steady decline in the older game. In the original plans, all Westward Journey 2 gamers will transfer to the newer game and the older game will be shut down. The best-laid plans of Netease hit major roadblocks early in open beta testing. Early trials of user account migrations from the older game to the newer transferred most of the virtual items, but made the items impotent. Balance problems and new "features" in the Westward Journey 3 also contributed to making the game unpopular to the older gamers. Under pressure from gamers, Netease finally announced that the company will continue to operate Westward Journey 2 independently from the newer game. In six months, Netease will give gamers the option to transfer their accounts from the older to the newer game, but both games will continue to exist. Westward Journey 3 is the third consecutive under-achieving game developed and launched by Netease. After launching mega-hits Westward Journey 2 in 2002 and Fantasy Westward Journey in 2004, Netease developed and launched a series of duds in Datang (2006) and Tianxia 2 (2007). Once a darling of Wall Street investors because of its knack for developing Chinese games for Chinese players, investors have started worrying that Netease has lost touch with the newer generation of Chinese gamers. Luckily for Netease, history is on its side. Chinese online game operator Shanda was in the same predicament two years ago. In 2005, Shanda had two hit MMORPGs in licensed Legend of Mir 2 and in-house developed World of Legend, as well as the largest online game development team in China with over 1000 developers and artists. The result was a pipeline of a trilogy of in-house developed titles - The Sign, The Age, and Magical Land. The first two were complete failures while Magical Land struggled to reach mediocrity. Shanda recovered from its reliance on in-house developed pipeline first by extending the life of its existing hit games with a new free-to-play model, and then by licensing a slew of Korean MMORPGs. Shanda's in-house development efforts have also shrunk to mainly advanced casual game development, leaving Netease as the largest online game developer in China. [Shang Koo is an editor at Shanghai-based Pacific Epoch, and oversees research and daily news content on China's new media industries, with a concentration in online games. Pacific Epoch itself provides investment and trade news and publishes a number of subscription products regarding the Chinese technology market. Readers wanting to contact him can e-mail [email protected].]