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Sony Corp.’s push to gain a foothold in China’s tightly controlled video-game market is getting help from an unlikely source: sellers of smuggled software.
When the PlayStation 4 went on sale in China after a 14-year ban on consoles was lifted, the government restricted Sony’s lineup to just six sanctioned games. By comparison, there are about 200 games for sale in Japan. That’s where Big Yao and Zhang Yang come in.
Yao’s shop in coastal Tianjin sells more than 40 PS4 titles, including banned games like Grand Theft Auto smuggled across the border from Hong Kong. The surreptitious availability of global blockbusters in China is good news for Sony, which relies on hit software to drive hardware sales and is trying to tap gamers in a market that may be worth $22 billion by 2017.
“There’s no need for an extensive government-approved catalog because you can already buy so many overseas titles,” said Yao, 31, who’s been in the business since 2008. “The launch of the PS4 was like a cardiac stimulant for the console market here.”
Yao asked that his surname not be used to protect his identity. His store is tucked away amid offices above an electronics mall to better hide from Culture Ministry investigators, he said.
Unlocked Consoles
His business is part of a gray market outflanking Chinese censors to deliver games like GTA, Call of Duty and Battlefield to players as Sony competes with Microsoft Corp.’s Xbox One for dominance in China. Unsanctioned titles also can be purchased through conventional means, such as Alibaba Group Holding Ltd.’s Taobao.com shopping website. The sellers advertise what they say is legitimate, and not pirated, software.
Sony indirectly fuels the gray market by selling a console that plays game discs bought anywhere in the world, though its online portals are blocked within China to prevent downloads of unapproved content. The Xbox One debuted in China in September with only 10 sanctioned games, and the machine didn’t play discs bought outside China.
“This is definitely a plus for Sony,” said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo. “Not having a region lock is good for gamers, but will the government continue to permit it?”
Xbox Update
A recent Microsoft update removed the region lock, according to users on Chinese gaming websites. Microsoft declined to comment in an e-mail.
“We are trying to offer the same goods in China as globally, while following local laws,” said Masaki Tsukakoshi, a Tokyo-based spokesman at Sony Computer Entertainment Inc. He declined to comment on whether China consoles are region-locked and the role played by smuggled games in the country.
Sony has added three titles to its China lineup since the launch, including PS4 exclusives Little Big Planet and Driveclub .
The company’s shares have risen about 9 percent since the console debuted March 20.
China’s Ministry of Culture didn’t respond to two phone calls and a fax seeking comment. Game consoles were originally banned in 2000 to protect youths from a perceived corrupting influence.
In central Beijing, five small shops huddled in a row display dozens of unsanctioned PS4 titles. Zhang, 35, runs Starfire Games, where he sells Mortal Kombat X, Call of Duty and Bloodborne for between 300 yuan ($48) and 400 yuan.
“This is one of the most popular games,” Zhang said while pointing to Grand Theft Auto V. “These are the kinds of games that make people buy the machines.”
Boosting Forecasts
Zhang said the games are imported from the U.S. or Hong Kong, as are some of the consoles he sells for about 2,600 yuan. His inventory also includes machines made specifically for the Chinese market, and they sell just as well.
“The local machines can still play all the imported games,” he said.
Even with devoted fans like Yao and Zhang, Sony and Microsoft may struggle to lure gamers used to playing free titles on smartphones and tablet computers. International Data Corp. forecasts the two companies probably will sell about 1 million units combined this year in China.
Sony and Microsoft don’t disclose sales in the country.
Network Services
Sony on April 22 raised its profit forecast for the second time since February, partly fueled by its games business. Chief Executive Officer Kazuo Hirai said in February that revenue from the games and network business could reach 1.6 trillion yen ($13 billion) within three years.
China’s Internet restrictions mean Sony’s shift to network services in the gaming business will leave the country behind. Hirai’s plan to raise profit to the highest since 1998 relies partly on online sales to its about 60 million active users.
That makes games sold via the gray market the primary way for Sony to generate hardware sales in China while building its local offerings of titles and services.
“We very much welcome Sony’s official launch,” Yao said at his narrow shop, where adults and children sit on a lime-green couch playing video games. “But this is still just the first step.”
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