News and Research on The9 Limited (NCTY)
Business Description
The9 Limited engages in the development and operation of online games, and Internet and website related businesses in the People’s Republic of China. The company’s business primarily focuses on operating massively multiplayer online role playing game (MMORPGs), including WoW and other games in China.
As of December 31, 2006, the company had obtained licenses to operate additional MMORPGs in China, including the following: a license obtained from Hanbitsoft, Inc., a Korean game developer to operate Granado Espada, an MMORPG developed by Korean game developer IMC Games, Co., Ltd., which is partly owned by Hanbitsoft, Inc.; a license obtained from Webzen to operate Soul of the Ultimate Nation, or SUN, a 3D MMORPG; a license obtained from NCsoft Corporation in 2006 to operate Guild Wars, a competitive online role-playing game; and a license obtained from Hanbitsoft, Inc. in 2006 to operate Hellgate: London, an action role-playing game.
The company, in September 2006, commercially launched its first proprietary MMORPG, JJW, which is a side-scrolling MMORPG based on cartoon characters.
Products and Services
The company offers engaging online games including MMORPGs and its self-developed online community game the9 City. The company’s other products and services include game operating support, Web site solutions and advertisement services, SMS and sales of its Pass9 system.
MMORPGs: In a MMORPG, thousands of players play in the same game world at the same time. MMORPG players can select a specific character to compete with in the game with whom they develop experience and enhance game attributes, which can be carried over into next higher game levels. MMORPGs incorporate various technology features, including: 2.5D or 3D graphics which expose players to captivating screen scenes; player upgrading system which allows players to attain game attributes with their characters as they develop experience and enhanced game capabilities over time; and instant messaging system which allows players to communicate with each other during the game and form groups with other players, thereby coordinating their game skills to achieve collective objectives.
The company, as of December 31, 2006, had licenses to operate or own the following MMORPGs in China: WoW, MU, Granado Espada, SUN, Guild Wars, Joyful Journey West, and Hellgate: London.
The company, in preparation for commercial launch of a new game, conducts ‘closed beta testing’ of the game to resolve operational matters, which is followed by ‘open beta testing’ in which the company allows its registered users to play without charge in open market conditions.
The company’s MMORPGs offer ongoing play experience which allows its users to play the game online 24 hours a day, seven days a week. The company’s users can access its MMORPGs from any location with an Internet connection. All of its users in China access the game servers either from PCs at home or Internet café outlets equipped with multiple personal computers that have Internet access.
Other Products and Services
The company’s other products and services mainly consist of its online virtual community named the9 City, its game operating support, Web site solutions and advertisement services, SMS service and sales of its Pass9 system.
The9 City: The company launched its online virtual community game ‘the9 City’ at www.the9.com in 2000 and commercialized it in December 2000. The company’s game the9 City was designed based on the idea of a virtual society consisting of mini games. As of December 31, 2006, the9 City had approximately 65 million registered users.
Game Operating Support, Website Solutions and Advertisement Services: The company’s game operating support, Web site solutions and advertisement services primarily relate to providing game operating support to 9Webzen in connection with operating MU in China. The company’s game operating support services to 9Webzen include payment collection and processing, user membership management, production of prepaid cards and other online game related technical support in connection with the operation of MU in China.
SMS: The company offers different SMS products and subscription packages that enable its users to, among other things, transmit and receive SMS messages, receive password protection and other value-added services.
Membership Management and Payment System
The company offers Pass9, an integrated membership management and payment system in China, allowing the company to maintain a single customer database that contains each customer’s profile and payment history. Pass9 provides one-stop service to its customers, distributors and developers. Pass9 provides its customers with an integrated platform to log in, pay and use any of the fee-based products and services the company offer. It also allows its distributors to sell its online points to Internet cafés, and enables Internet cafés to check the balance of their points and pay the company on their customers’ behalf. In addition, Pass9 provides its game developer partners with interface to integrate their games to its system.
The company’s integrated membership management and payment system also incorporates various community-building features, such as chat rooms which provide registered users a platform to interact in real-time groups or one-on-one discussions, and bulletin boards which allow registered users to post notes or inquiries and respond to other users’ notes or inquires.
Distribution: The company, for WoW, has entered into agreements with approximately 20 regional distributors for its prepaid cards and approximately 40 regional distributors for its online points. These regional distributors sell its prepaid game cards and online points to approximately 500 local distributors who in turn sell the game cards to end users and prepaid online points to Internet cafés throughout China. As of December 31, 2006, WoW had approximately 6.8 million activated user accounts and approximately 210,000 Internet cafés have subscribed to its eSales system, which enables Internet cafes to sell its prepaid online points to their customers. For MU, the company has entered into a distribution agreement with Junnet Group to appoint it as the distributor of its prepaid game cards in China.
Competition
The company’s competitors include online game operators and Internet portal operators in China. These include Shanda Interactive Entertainment Limited (which operates ‘Legend of Mir’ and Actoz Soft’s ‘Legend of Mir 2); Guangzhou Optisp’s (which operates Wemade’s ‘Legend of Mir 3); 163.com affiliated with NetEase (which operates ‘Westward Journey Online’ and ‘Fantasy Westward Journey); and Sohu.com (which operates ‘Knights Online’ and ‘Blade Online).
History
The9 Limited was founded in 1999. The company was formerly known as GameNow.net Limited and changed its name to The9 Limited in 2004.
