Taiwan Today

Taiwanese companies are taking on the opportunities and challenges of the game industry.

It seems like people just cannot get enough of digital games these days, especially as the use of smartphones and touch-screen technology has become more widespread. From buses to trains to sidewalks, one can see people with their heads down, busily punching keys or tapping their fingers on the small screens. While some of them are no doubt texting or checking messages, more and more people are playing games on their mobile devices, the latest platform to gain popularity among gamers.

Typically, digital games are played on consoles, personal computers (PC) and mobile devices. Regardless of the device, the global market for the sector is growing, and Taiwan is no exception. “The number of gamers is growing fast and the total time spent on playing games is surging,” says Philip Chang (張厥猷), chairman of Lager Network Technologies Inc., a leading game company in Taiwan. “The mobility of cellphones and related new technologies provides people with easy access to games, thus creating a group of new players including commuters, women, children and the elderly,” explains Chang, who also serves as chairman of the Game Industry Promotion Alliance, a strategic partnership formed by Taiwan’s major game firms to spur development of the sector.

Ting Hung-yu (丁鴻裕), a digital media industry analyst in the Market Intelligence & Consulting Institute (MIC) under the Institute for Information Industry, points out that the output value of the global digital game industry has recorded an average of 7 percent growth per year since 2010 and is estimated to hit US$69 billion this year. Statistics from the Republic of China’s Ministry of Economic Affairs (MOEA) indicate a similar upward trend in Taiwan, showing that the production value of the local digital game industry has been on the rise for the past 10 years, reaching NT$43.62 billion (US$1.45 billion) in 2011.

Taiwan’s digital game industry began to emerge in the 1990s when PCs gradually replaced televisions as the most common platform for games. At the time, Taiwanese companies created several successful optical disc-based games, thus laying a firm foundation for the later development of the country’s game industry. “Robust game development capability has been Taiwan’s greatest strength since the beginning,” says Wonder Lin (林蓓心), chief executive officer of XPEC Entertainment Inc., a leading game developer that makes games played on a wide range of platforms, including PCs, consoles and mobile devices. “The games created by Taiwan at the time, such as The Legend of Sword and Fairy and Xuan-Yuan Sword remain classics to many gamers today, especially to those in mainland China.”

In the 2000s, online games began to dominate the local market and Taiwanese firms soon caught up with the new trend. According to Chang, many of Taiwan’s leading game companies today were made famous or became listed on the country’s over-the-counter market after launching just one successful online game. Some of the examples include Lager, which created the first massive multiplayer online role-playing game developed for the Mandarin-speaking market, King of Kings, in 1999; Gamania Digital Entertainment Co. Ltd., which operates Lineage in Taiwan after gaining the license from the South Korean developer; and Chinese Gamer International Corp., which is a subsidiary company of Soft-World International Corp. and the maker of Huang-Yi Online.

To do well in any industry requires overcoming challenges, however, and that is especially true in the game business. Due to the high cost of development, Ting says that most Taiwanese firms have to start by purchasing franchise rights to games produced in other countries before considering creating their own. “It usually takes two to three years to develop an original game,” Ting says. “And the development cost continues to rise because of the growing demand for higher-quality games, such as those presenting better visual 3-D effects or built on better game engines.”

High-Stakes Startup

The game engine is the software framework developers use to create a digital game, and it is considered the most fundamental part of a game. Lager and XPEC both operated in the red for several years because they started up by developing games and generated very little revenue before issuing their first products. Lin says that she realized the tremendous time and effort required to create a new title during the process of developing Ex-Chaser, a game designed for the Xbox, the video game console made by Microsoft, and the first game XPEC created. Since console games do not have the flexibility of online games, which allow software bugs to be fixed by patch programs, there is no room for mistakes after a product is put up for sale, Lin says. “Therefore, to prevent a massive recall after it hits the market, we have to control every [software] flaw and bug so that it can be bug-free,” she says.

Even so, Lin considers the struggle beneficial to game developers in the long run, as has been the case for XPEC. By participating in every part of the production process, Lin says that her company gets the chance to work directly with international publishers, understand their needs and learn how to make a product that will meet their standards. “The experience and technologies we have accumulated over time are what set us apart from other competitors,” Lin says. XPEC is best known for creating several well-known video games based on movies, including Kung Fu Panda, which launched in 2008, and Shrek Forever, also known as Shrek 4, which was published in 2010.

Ting notes that developing gambling and role-playing games has been Taiwan’s forte, adding that the country’s fairly open market is also favorable for the local games sector as a whole. Chang shares the sentiment, saying that one can find all types of digital games in Taiwan’s market. “The level of acceptance is high among local players toward a wide variety of games,” he notes, adding that this makes the country an ideal place to test new products.

As games are typically developed by a team consisting of game programmers, artists and designers, Taiwan’s greatest asset is its high-quality talent pool in the field of information technology, Lin says. Still, finding the right staff can be difficult. Chang notes that the sector experiences large seasonal swings in employment and says it is a challenge to find sufficient high-quality contract workers when the company needs them. “When a game is close to being launched, the labor force needed at the time is massive, but after that, we need a lot fewer to manage and maintain a system,” Chang says.

Local companies face not only internal or sectoral pressures, but also competition from overseas. South Korean developer Nexon Co. Ltd., for example, was reported in May this year to be planning a merger with Taiwan’s Gamania. Although Gamania later released a statement refuting the news, the incident set off alarm bells among local game firms. Ting says that a merger with a foreign company would likely cause great harm to the local game industry as it would give foreign companies access to a company’s local distribution channels and existing players. The independence of the domestic firm would also be affected, he adds.

Due to Taiwan’s relatively small market, Lin emphasizes the importance of thinking beyond the local market when creating games. “Games are a cultural creative prod-uct and there should be no boundaries for them, although there may be certain preferences in different regions,” she says. “It’d be difficult for a product to recover its costs if it only focused on Taiwan’s users.”

Holding Back Development

Chang notes that playing digital games has long been labeled a “bad” entertainment choice for young people, and this stereotype has held back Taiwan’s development in the sector. He explains that the situation is not only a matter of sales, but also affects the younger generation’s interest in working in the industry. Chang notes that he found very few graduates from top universities who grew up playing games. “If these top students don’t play games, why would they work in the industry?” he says. “The first requirement for getting a job with my company is that the applicant has to be a game veteran. It’s almost impossible for one to catch up on all the games from the past 10 years within a short time.”

In light of this, Chang emphasizes the great importance of implementing a game rating system in Taiwan. “You have to give parents some peace of mind so that they’ll allow their children to play games,” he says. The MOEA responded to such concerns by announcing a rating system in May this year that will classify all games published locally into five categories: universal (suitable for all ages), parental guidance for six years and older, parental guidance for 12 years and older, parental guidance for 15 years and older, and restricted (games for those over the age of 18). The new scheme is set to take effect at the beginning of 2013, according to the ministry.

Chang hopes that the system will lead to more interest in the industry and the standardization of the basic technologies used to develop games, with the knock-on effect that more colleges and private institutes will begin offering education in the field. Currently, great variations exist in the technology and approaches that local firms use to create game engines, Chang says. “That’s why our company has to re-train all new employees no matter how long they’ve been working in the business, and the training usually takes at least six months,” he says.

The rapid growth of mobile games has given rise to a lot of small game developers, according to Lin, who considers the industry to be going through a relatively unstable phase for that reason. Chang agrees, saying, “The industry has been going through a reshuffle.”

Lin, however, says the situation represents more opportunities for the industry in general, explaining that she expects a number of big game developers and aggregators to appear as a result of the current fierce competition in the mobile game market. “Developers are giving it their all, right now, because we haven’t seen anyone emerge as the No. 1 in the market,” she says. “For example, to get their games known as the top ones among so many in the market, developers will soon realize the need for strong marketing. When that time comes, there will be aggregators who come out to take care of the marketing part of the business,” she says. According to MIC’s Ting, the rule has generally been that “the bigger get stronger” in the game industry due to the high level of capital and technology required.

Critical Timing

Chang points out that timing and the speed of creating games are especially critical for developers to stand out in the mobile game market, as cellphone technology is evolving fast. The design concept for mobile gamers also has to change, he says. For example, encouraging a user to stay online as long as possible is no longer a game designer’s top objective. Instead, it is more important to create a fun offline environment so that users can continue playing if the Internet reception is slow on a mobile device, he explains.

The market’s winner-take-all stakes remain the greatest attraction for game developers, however. “If you happen to seize the trend and create a game that becomes a big hit, you can immediately recover all your investment,” Chang says. “One type of game usually hits the jackpot only once. Chances are slim for copycats to become as successful as the first one no matter how hard they try.” He adds that the dream of all game developers is to create a product that can be played for years to come, just as he has taken great pride in creating Fairyland, a game that has been popular since it was launched by Lager in 2003.

In the end, though, as games become more accessible across a wider range of platforms, what might be more important is for developers to gain a deeper understanding of their consumers so that they can design products according to the specific behavior, needs and preferences of various groups of users, Lin says. “This will make a huge difference in whether a product can sell well and strike a chord with targeted gamers,” she notes. “In essence, the creativity required for designing a game won’t change too much because of the rise of a new platform,” Lin explains. “It all comes down to whether or not a story can touch people’s heart.” When a game can achieve that, regardless of how simple or how complicated it is, it will stand a chance to succeed in the market, she adds.

Write to Audrey Wang at ycwang06@mofa.gov.tw