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China's grey market console base "2-3 million units"

Niko Partners' Lisa Hanson explains why living room platforms should be legalised

The grey market in China for consoles - including PlayStation 2, PlayStation 3, Xbox, Xbox 360, Wii and GameCube - stands at an installed base of around 2-3 million units, according to Niko Partners' managing partner Lisa Hanson.

Of those hardware platforms it was estimated that around 750,000 Wiis were brought into the country unofficially last year, alongside around 625,000 Xbox 360s - which all adds up to a lot of lost revenue for the platform holders and Chinese government alike, with the latter a good reason for consoles to become legal in the country.

"Well there are about 2-3 million units sold illegally at full market prices now for consoles - and those people have to seek them out," she told during an interview at this year's Games Convention Asia in Singapore.

"PS2, PS3, Xbox, Xbox 360, Nintendo Wii, GameCube... it all exists. The PS2 is very popular because there are so many games available for it that are pirated," she continued. "PS3 is less popular because it's more expensive and it's more difficult to get the pirated games, but Wii outpaced PS2 last year - I think we estimated 750,000 Wiis were sold in 2008, along with 625,000 Xbox 360s.

"This is all lost revenue for Microsoft and Nintendo, and it's also lost tax revenue for the Chinese government. And more importantly to the Chinese government it's a loss of control of the content - so it's really in their best interests to get out the stick."

Niko Partners believes that the market in China - predominantly PC online gaming - will be worth USD 3.65 billion this year, and will rise to USD 8.8 billion by 2013 as the number of online gamers jumps from 60 million to 100 million in that time frame, but even that estimate is based on slowing growth in that time.

"On a compound growth rate it's only about 19 per cent, and we've had huge growth over the last few years," she explained. "2008 over 2007 was something like 73 per cent, and the year before that was about 70 per cent. This year versus last year it's about 35 per cent growth - and that's with World of Warcraft being offline for a while.

"As we have slowing growth, basically to keep our forecast reasonable we're pulling down the growth as much as we can. By 2013 we're sub-20 per cent for the revenue growth, but we still have this big boom in internet users. So the sub-segment of total internet users who will be gamers is about 100 million."

The full interview with Lisa Hanson, in which she also explains why China is a crucial market for Blizzard with World of Warcraft, is available now.

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