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Motley Fool  Jul 17  Comment 
Having gained 44% this year, this stock doesn't seem to have any more upside.
newratings.com  Jul 14  Comment 
WASHINGTON (dpa-AFX) - Salix Pharmaceuticals Ltd. (SLXP) and Progenics Pharmaceuticals (PGNX) announced that the Food and Drug Administration has informed Salix that RELISTOR (methylnaltrexone bromide) Subcutaneous Injection, 20 mg/ml, for the...
newratings.com  Jun 30  Comment 
CAMBRIDGE (MASSACHUSETTS) (dpa-AFX) - Vertex Pharmaceuticals Inc. (VRTX) said Monday that it has submitted a supplemental New Drug Application to the U.S. Food and Drug Administration for the approval of KALYDECO® in people with cystic fibrosis...
newratings.com  Jun 30  Comment 
LONDON (dpa-AFX) - GlaxoSmithKline plc (GSK, GSK.L) and Theravance Inc. (THRX) announced the submission of a supplemental New Drug Application or sNDA to the US Food and Drug Administration or FDA for a fixed dose combination of the inhaled...
Benzinga  Jun 17  Comment 
Shares of Shanda Games Ltd (NASDAQ: GAME) are volatile in Tuesday's post-market session following first-quarter results from the company. The stock initially spiked to a low at $6.69, then popped to around $6.79, where the stock last traded....
newratings.com  Jun 10  Comment 
BEIJING (dpa-AFX) - Shanda Games Limited (GAME) said that its net income attributable to shareholders for the first quarter declined to RMB305.7 million or $49.7 million, from RMB367.6 million in the comparable quarter last year. Earnings per ADS...
newratings.com  May 13  Comment 
PETAH TIKVA (dpa-AFX) - Teva Pharmaceuticals Industries Ltd., (TEVA) Tuesday said the U.S. Food and Drug Administration or FDA has accepted its supplemental new drug application or sNDA for a lower dose QNASL Nasal Aerosol for the treatment of...
SeekingAlpha  Apr 22  Comment 
By Doug Young: The online game industry has just gotten a small hint of potential consolidation, with word that mid-sized player Perfect World (Nasdaq: PWRD) is buying a stake of rival Shanda Games (Nasdaq: GAME), which is in the process of...
newratings.com  Apr 21  Comment 
BEIJING (dpa-AFX) - Shanda Games Ltd. (GAME) announced that Shanda Interactive Entertainment Limited, the controlling shareholder of Shanda Games, has entered into a share purchase agreement with Perfect World Co., Ltd. (PWRD), for Perfect World...
StreetInsider.com  Apr 3  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Corporate+News/KU6+MEDIA+SP+ADR+%28KUTV%29+Reports+Shanda+Media+Completes+%27Transaction%27%3B+Director+Wu+Resigns/9348015.html for the full story.




 
TOP CONTRIBUTORS

Shanda Interactive is an online video-gaming company catering to Mainland China . It sells MMORPGs (Massive Multiplayer Online Role Playing Games) such as the titles Archlord, Woool and Mir 2[1] which tend to sell to hardcore gamers, as well as casual games such as Maple Story and online chess that appeal to a much broader audience.[2]. Shanda also licenses management software to internet cafes in China and is promoting its new “EZ” platform, a home-entertainment set-top box that delivers games and movies without a required subscription.[3]

Business Overview

Business & Financial Metrics[4]

In 2009, Shanda generated a net income of $233.3 million on revenues of $767.8 million. This represents the first year the company reported its earnings in US dollars.

Business Segments[5]

The company generates revenue in three primary reporting segments.

  • MMORPG (86.8% of total revenue:) The MMORPG segment caters to “hardcore” Chinese gaming youth, with an immersive game experience that typically requires and commands a significant amount of time from Chinese youths. "Younger" games typically have lower revenue per subscriber since users have not been in the game world that long and don't have as much reason to spend money. The company can earn more revenues by compelling customers to spend more time in the game, thus motivating them to consider making purchases and improving their characters in game. This improves the performance of both metrics at the same time. This business is exposed to the age of the primary two titles, and is seeking a new replacement blockbuster title.
  • Casual Gaming (12.1% of total revenue): Casual games require less user-game time and typically can be played to conclusion within a shorter period of time in one session. These simpler games appeal to a larger demographic than the MMORPGs and thus diversify the company’s earnings. These games also use the free-to-play model, as well as earnings earned from internet-revenues.
  • Other (1.1% of total revenue): The company sells software associated with running internet cafes, and also is attempting to launch its “EZ” series of home-entertainment devices. However, revenues any one of these minors business are not significant. EZ’s sales come from bundling with computer manufacturers, and is thus dependent on Shanda’s agreements with computer manufacturers. While it has a number on board[6], Shanda does not have support from China’s #1 computer manufacturer, Lenovo. Such a type of agreement would likely dramatically improve sales figures for this new business.

IMAGE:SNDA-Segments2009.jpg

Trends/Forces

Primary two MMORPGs are games nearing end of life, and new businesses are largely licensed from foreigners and unproven

Woool and Mir 2 are both very old titles, running on older graphics and slowly losing parts of their user base. Gamers are turning to other alternatives, such as World of Warcraft, operated in China by The9 (NCTY), that use more sophisticated 3-D graphics running on newer computers in Chinese internet cafes. It is necessary, but difficult, for the company to find a new "hit" title, and this will be dependent on a number of soft factors that accumulate into end-user appeal.

Business model transition to free-to-play appears to be generating more revenues, but further exposes company to individual games' popularity

The free-to-play model works in the case of Woool and Mir 2 because they were old games with large user bases. Since gamers had already spent a large amount of time in the game, they were "invested" in their characters and thus more willing to pay for premium content. The free-to-play model requires these "hard-core" users in order to pay for the operation of servers and to subsidize for the users who are not willing to put additional money into their characters. Acquiring these paying subscribers is dependent on each individual game's popularity, as gamers are less likely to invest in an online-gaming character without other people to socialize with and compete against online. Therefore an unpopular game will not ever recoup its initial capital outlays in the free-to-play model.

Competition

Primary competitors are Chinese operators of online-games. Although there is some competition from foreign companies, they are limited by Chinese law from achieving market penetration, since any Mainland Chinese venture has to be more than 50% Chinese owned/operated. Therefore, Shanda’s primary competitors are:

  • Perfect World (PWRD) - Another developer and operator of online games in Mainland China, using its own technologies. Its main product is self-titled Perfect World.
  • Netease.com (NTES) - the second largest company. However, concerns in 2008 surrounding the company indicate that its development pipeline is weak.
  • The9 (NCTY) - The9 operates World of Warcraft in China on behalf of Vivendi Games. World of Warcraft is the world's most single popular MMORPG title.[7]

References

  1. Shanda Interactive "Risk Factors" pg. 4
  2. Shanda Interactive "Operating Results" pg. 45
  3. Shanda Interactive "Risk Factors" pg. 6-7
  4. SNDA 2009 20-F pg. F-3  
  5. SNDA 2009 20-F pg. 69  
  6. Shanda Interactive FY 2007 20-F "Our EZ Initiative" pg. 33
  7. GigaOm "Is WoW the Most Popular MMO" June 10, 2007
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