These excerpts taken from the SOHU 10-K filed Feb 26, 2009.
Our online game business may be materially harmed if we do not feature our games in a sufficient number of Internet cafés in China.
A substantial number of players access our games through Internet cafés. Due to limited hardware capacity, Internet cafés generally feature a limited number of games on their computers. We thus compete with a growing number of other online game operators to ensure that our games are featured on these computers. This competition may intensify in China due to a nationwide suspension of approval for the establishment of new Internet cafés in 2007. The PRC government has announced its intention, and has begun, to intensify its regulation of Internet cafés, which are currently the primary venue for our game players to play online games. Intensified government regulation of Internet cafés could restrict our ability to maintain or increase our revenues and expand our player base. We take steps to ensure that our games are featured in a sufficient number of Internet cafés, including maintaining good relationships with Internet café administrators, requiring our distributors to maintain a sales presence in a wide range of Internet cafés and general sales and marketing efforts. If we fail to maintain good relationships with Internet café administrators, or if we and/or our distributors fail to successfully persuade Internet cafés to feature our online games on their computers, our business, financial condition and operating results may be materially and adversely affected.
Further, pursuant to the Internet Cafés Notice, Internet cafés are required to obtain an Online Culture Operating Permit from the MOC and register the same with the State AIC. The Internet Cafés Notice also provides restrictions with respect to Internet cafés location, size, number of computers, business hours and the ages of customers. For instance, Internet cafés are prohibited from operating between the hours of 12 a.m. and 8 a.m. These regulatory restrictions on the operation of Internet cafés may negatively affect our business operations.
Our online game business may be
A substantial number of players access our games through Internet cafés. Due to limited hardware capacity,
Further, pursuant to the Internet