Lenovo's China launch raises questions over game console ban

Wed Jul 6, 2011 6:05am BST

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Quotes

   

* Games subsidiary Eedoo plans autumn start for iSec console

* Company touts iSec as "home entertainment device," not just for games

* Sony, Microsoft, hopeful restrictions will ease soon

* "Entrenched" online game sector may limit market for consoles

By Isabel Reynolds

TOKYO, July 6 (Reuters) - Lenovo's launch of a home videogame console in China this year may throw into question the country's decade-old ban on the gadgets and could eventually open the $5.8 billion Chinese game market to Sony Corp and Microsoft .

Eedoo Technology, a games subsidiary of PC giant Lenovo Group , plans to launch its iSec console, a gesture-controlled gadget akin to Microsoft's Kinect, in China in September or early October, Zhang Zhitong, a company spokesman said. He declined to say if it had official permission.

"This makes it curious about the law that bans consoles," said Lisa Cosmas Hanson of Niko Partners, an Asian game market consultancy.

Hanson said the law effectively banning the sale of games consoles has been in place since 2000 and came about after pressure from disapproving parents.

An apparent breach of the regulation could spark accusations of unfairness.

"Somehow they're getting away with this where the other console companies are not," Hanson added. "Let's say you're touting this product as a competitor to the Kinect, then why doesn't Kinect qualify?"

China's Ministry of Industry and Information Technology, which governs the game industry, did not respond to questions submitted by fax and telephone about the Eedoo launch or the status of the ban.

Eedoo declined to comment on whether it had official permission to launch the console, which has been delayed from an initial launch date in the first quarter of the year.

But the company emphasised its console can be used for more than just games and said it was in talks with government authorities, although the specific nature of the talks is unclear.

"This device can show pictures, play music, go online and has many other functions," Eedoo's Zhang said. "It is a home entertainment device. The gaming function of the machine is just one of its many capabilities."

The same argument could be used by Sony, whose PlayStation3 console doubles as a Blu-ray player and can be used to access its Qriocity music and movie streaming services.

Sony has long lobbied for access to the Chinese market after it pulled out following an officially sanctioned, but limited, launch of the PlayStation 2 in 2004 that was abandoned in less than a year.

Sony declined to specify reasons for the withdrawal, but some in the industry blame overwhelming piracy while others say it was due to a Chinese government about-face.

Sony's PS3 and Microsoft's Xbox are available on the grey market in China, while Nintendo has a basic console, the iQue, on sale via a local joint venture partner.

REVENUE BOOST FOR GAME MAKERS?

Permission to market the devices officially would likely mean more profit for the games giants, but neither Sony nor the Japanese government want to take a confrontational approach.

"The Chinese government ultimately needs to make the decisions. We can't force it," said Kazuo Hirai, Sony's second-in-command and the outgoing president of its games unit, in an interview at the E3 games convention in Los Angeles in June.

He said the company was trying to persuade the Chinese government of the potential benefits for Chinese software developers of legalising consoles and that he was optimistic about the outcome.

"I think the Chinese government is looking for a lot of opportunities for exporting certainly a lot of hardware-based products, but also culture and entertainment content as well. I'm very optimistic that way," Hirai added.

Microsoft echoed Sony's upbeat outlook.

"While Xbox has not yet been introduced to the China market due to restrictive policies, we are hopeful that we will be able to take this step soon," a company spokeswoman said.

But even if the market is opened to the world's console giants, the ban has enabled PC-based online gaming to dominate the industry. It is unclear how many Chinese consumers would pay extra for consoles.

"The PC online model's so entrenched there. Gamers love playing those games because they don't really have to pay for a specific hardware device," said Niko Partners' Hanson. "Consoles would require a big investment and have limited use," she added. (Additional reporting by Melanie Lee in SHANGHAI and Huang Yan in BEIJING; Editing by Matt Driskill)

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