Studios aim to conquer China gaming with Hollywood icons

Who REALLY spends money on mobile games?
Who REALLY spends money on mobile games?   

When the mobile game "Despicable Me: Minion Rush" launched in China, Eric Tan and his team at Gameloft were facing a challenge: Chinese gamers weren't spending their digital bananas.

To be precise, the players kept declining to "buy" more game time with the bananas, which they collect throughout the game and can also be used to upgrade characters. So Gameloft decided to let them purchase the time for one yuan.

Spending real money instead of fake money may seem strange, but Tan said the move significantly improved the title's in-app sales in the country.

That experience and others showed Tan that there is money to be made in "culturizing" games for China. Together with fellow gaming executive Craig Derrick, he founded Fifth Journey, a mobile entertainment company that aims to help Hollywood studios conquer China's booming gaming market.

In doing so, they join other developers hoping to wed China's love affair with American movies with the country's mobile game craze.

""For Asia, you have to go big or go home, either you just go all the way culturalized, or you better just not bother doing it."" -Eric Tan, Fifth Journey co-founder and CEO

China is the biggest international market for U.S. movies, drumming up $4.8 billion in 2014, according to the Motion Picture Association of America. But now Hollywood wants to own handheld screens, too.

By the end of 2015, China was home to 420 million mobile gamers who spent a collective $5.5 billion, Niko Partners estimates.

"Hollywood knows that mobile gaming is a fast-growing segment, and Hollywood knows that the big part of the growth will come from Asia, mainly China," Tan told CNBC.

While the opportunities in China are immense, so are the challenges. Developers must contend with a high percentage of low-tech phones, data costs that are pricey for many consumers, and a fragmented distribution network made up of hundreds of app stores.

But in the end, it all comes down to adapting Western properties to the tastes of Chinese gamers, say executives.

Currently, Asia-based developers like Tencent, Gungho, and Netmarable command the charts by delivering content tailor made for the region, SuperData says.

Fifth Journey last month announced a partnership with Universal Pictures, Lionsgate Films, and MGM Studios to develop mobile games based on their properties (Universal's parent company is Comcast, which also owns CNBC).

The studios will give Fifth Journey early access to scripts, and the publisher will use its experience to adapt games for Asian markets.

American movies that outperform in China provide good source material, said Tan. Last year, Fifth Journey partnered with Lionsgate to develop a game based on "The Expendables" series. While the franchise's earning power has slipped in the United States, its box office haul has grown in China.

Fifth Journey has also built an entertainment platform that integrates ticket and merchandise sales and streaming video into the gaming experience to help increase the time users engage with the properties.

China has also become a major market for movies based on comic book superheroes. San Francisco-based Kabam aims to leverage that trend by launching its hit fighting-strategy game "Marvel: Contest of Champions" in China this year.

Disney's Marvel Comics films have made Captain America and Iron Man household names in China, but Kabam has changed more than 70 of the game's systems to make it a better fit for the local market.

For one, Kabam's developers realized Chinese gamers were more interested in collecting and leveling up the characters than fighting with them. Consequently, it has had to retool the core gameplay to make it easier for players to advance their characters without grinding through battles, Kabam Chief Operating Officer Kent Wakeford told CNBC in an interview last year.

Kabam is also trying to set itself apart by offering experiences that make players feel like VIPs, including a dedicated support system. But delivering white glove service will be a logistical challenge in a country of China's size, Wakeford said.

"We really have to think about how do you do that and how do you do that at scale?" he told CNBC in October. "It's one thing to call up and say, 'Have you thought about this or that?' But how do you do it in a country where it was announced there are going to be 420 million gamers this year?"

Whether those investments will pay off remains to be seen, but developers are coming to the conclusion that success in China's gaming market will not come easy.

"For Asia you have to go big or go home, either you just go all the way culturalized, or you better just not bother doing it," Tan said.

CORRECTION

This report has been updated to reflect that Fifth Journey will have early access to scripts under its partnership deals.