China remains a tough market for Sony’s PlayStation 4 and Microsoft’s Xbox despite the government’s decision to lift a 15-year ban on game consoles last year. But a local entrepreneur thinks he has a better chance of winning over Chinese consumers.
In April, more than ten thousand people streamed into Beijing’s 798 Art Zone, an exhibition center of avant-garde designs, to attend the official launch of Fuze Tomahawk F1, an Android-based video game console made by veteran gaming entrepreneur Wang Feng. The model, which comes with more than 70 popular titles includingAssassin’s Creed Chronicles andDynasty Warriors 8: Xtreme Legend, is priced at 899 yuan ($137) or 1,499 yuan ($229) for different hardware specifications. Consumers will be charged a membership fee of less than $3 per month for access to Fuze’s game portfolio.
The 47-year-old Wang is hoping that the low-cost model can convince more people to try console gaming. He is targeting people who will buy it for family entertainment. Unlike hardcore gamers, those Chinese consumers are deterred by the prices of the 2,999 yuan Xbox and the 2,899 yuan PS4, although they are looking for contents that are better than the simple and poorly designed games a cheap set-top television box usually offers.
Fuze also has video and live streaming functions. Wang’s startup is partnering with online video company LeEco to stream movies through the device. People can live broadcast their online battles on the console’s social platform as well. Wang is considering adding a karaoke function, which is a favorite pastime of Chinese millennial, so gamers can turn Fuze into a multipurpose entertainment device.
“We are trying to build it into an entertainment console for the entire household,” he said in a group interview after the launch. “This product will be for the mass market.”
Fuze, however, will encounter some reality checks. Chinese consumers seem to prefer desktop and mobile gaming over consoles. Last year, Sony and Microsoft sold a combined 550,000 units in the country, according to Asia gaming consultancy Niko Partners, which estimates that revenues from the country’s television-based gaming market was a mere $654 million. China’s entire game industry reached $22.2 billion last year, surpassing the United States to become the world’s largest game market, according to Amsterdam-based research firm Newzoo.
Wang acknowledges that China’s console market is small, but says he foresees a considerable demand for a connected entertainment device as people slowly start to play games on TV. Fuze’s social functions will also help to retain users as they grow accustomed to showing off their gaming achievements through the device, he says.
“There is a gap in console gaming due to the government’s ban,” Wang says. “But we are trying to make people understand that a more diversified gaming experience in the living room is something worth going after.”
Fuze seems well-funded for its plans. Linekong, a Hong Kong-listed mobile game developer that Wang chairs, contributed $26.3 million to Fuze’s $60 million in total funding.Other investors include entertainment company Baofeng Tech, online video site LeEco, IDG China and Northern Light Venture Capital.
The product’s lower price point means there will be a niche for it, but any real demand will largely depend on its content line-ups, says Niko Partners founder Lisa Hanson. “The games are really the important draw, and if Fuze can offer more high quality titles, then demand will follow,” She says.
Wang meanwhile is likely to fare better than Sony and Microsoft with Chinese censors, whose stringent game-reviewing process has drastically reduced PS4 and Xbox’s game portfolio, according to Cui Chenyu, an analyst at data provider and research firm IHS. Sony and Microsoft have “more or less given up” the China console market due to challenging regulatory conditions, which leave the opportunities to local startups like Fuze, according to Newzoo Chief Executive Peter Warman.
“The majority of Chinese households now have bigger TV screens, so there is potential for game consoles to grow,” Warman says. “I am certain it requires a local company to break the market.”
PS4 has less than 20 government-approved titles two years after launching in the country. Xbox currently has 25 titles, and it took the company a year and a half to get video gameHalo: The Master Chief Collection approved by regulators, who closely examine foreign games for potentially bloody, violent or sexual scenes.
Fuze might also be banking on a future wave of virtual reality games, according to IHS’s Cui. “You can play virtual reality games either on a laptop or a console,” she says. “I think Wang is trying to gain an upper hand in console-based VR gaming by launching Fuze now.”
Wang is also investing in local game developers. He has put aside 200 million yuan ($31 million) for investments in game and virtual reality startups so Fuze can have a steady stream of content. He has already invested in independent game developer Yao Kan and MegaFun Games, a Shenzhen-based studio founded by former Tencent executive Zhang Hanrong.
“Before me, there was no one giving them money,” he said during an interview in his Beijing office in January. “Some local developers want to work for Sony and Microsoft, but there are too many teams waiting in line.”
But not all the attention on Fuze is positive. Many on social media criticized the console as a cheap knock-off of the PS4, while others noted the controller looked strikingly similar to the Xbox gamepad. “Fuze’s controller and user interface are just copycats,” one user wrote on Zhihu, a Chinese Q&A site similar to Quora. “Who would buy that for 1500 yuan?”
By YUE WANG, Forbes, May 20, 2016, 1:11 am