Shanda
= case of user participation in game development
Discussion
Charles Leadbeater:
"Timothy Chan may know a bit about where this is taking us. I met him in a plush, private dinning room, in an exclusive restaurant designed for Shanghai’s new rich, half way up a skyscraper, that sits on a plot of land that ten years before grew vegetables. Now Pudong grows skyscrapers. Chan’s cherubic face and engaging eyes belie his ambition and drive. He wants to build one of China’s most successful companies and what he stumbled on, in 2001, was a way to distribute content to millions of Chinese consumers and get them to pay for it, upfront. Chan used China’s rampant culture of illegal file-sharing to his advantage. His company, Shanda, is not so much customer driven as customer created.
In 1999 Chan left his job as a government adviser to start his own business at the height of the dot.com boom. Chan, his wife and three friends set up an Internet business in his apartment, raised some venture capital funding and started to fiddle around. They got nowhere and in 2001, virtually broke, they launched themselves into multi-user online games on the back of a game they bought from Korea. It went stratospheric. By 2004 Chan’s company Shanda had 170m registered users and 60% of the Chinese online games market with 10m regular players. When Shanda launched its first home grown game it recouped its $1m development costs in a single day of playing.
A key to Shanda’s success (Chan’s contacts in the government have been pretty important as well) has been providing users with a platform for participation and contribution. Shanda distributed its content quickly and cheaply by giving away the basic game software. The company expects the game to be copied over and over again. The players spread the game through a sibling system of distribution. There is neither a sales force, nor a marketing department. However before someone can start playing a game they have to activate it, which means logging onto one of Shanda’s servers, providing a credit card or a pin number from a pre-paid card purchased from a newsagents. The games are mass social events. More than half the participants play from Internet cafes with other people. Shanda specialises in multi-user games, in which a player adopts a character in a fantasy society. The more players, the more action: Shanda provides the playing field, or to be more accurate, usually a battlefield. Chan explained the appeal while crunching through a duck pancake: “The average user plays for three or four hours a day. They concentrate on building up their character and profile in one game. More users means more distribution, which means more action, which attracts more players. It is a virtuous circle.”
When a player runs into payment difficulties they lose access to their character. In that situation they have two options. They could buy a new character quite cheaply but that would mean starting all over again, building up a history from scratch. The alternative is to get on a plane to Shanghai, stay overnight in a hotel and queue outside Shanda’s offices in Pudong to reclaim your original character, complete with all its history and store of reputation. That costs ten times more than the first option. Nevertheless every morning about 500 people are in line outside the Shanda headquarters. To support this vast undertaking – 9,000 servers, in 60 cities and 30 provinces, used by tens of millions of people a week – Shanda employs just 600 staff. Those are the new economics of barefoot organisations: small bodies of professionals can support vast swarms of participants, so long as the users have the tools they need to support themselves."