Monday, September 26, 2005

Shanda Exposed it's Ambition with Microsoft Connection

Taking advantages of Microsoft, Sina, and Changhong, Shanda intended to unite web, TV, and games

(9/27) Yesterday, CEO of Shanda, Tianqiao Chen openly admitted that they are in negotiation with Microsoft on "collaboration on XBOX". The attempt to acquire Sina is just a "sideshow" from the Microsoft relationship. The rumored third party behind Shanda is also exposed.

Chen revealed his ambition to build an entertainment empire that combines web, TV, as well as games.

"Shanda is moving into the living room. As to the detailed means, whether it's a set-top box, or an IPTV is not important. For me, it's just PC, internet, and digital games. Shanda is the strongest player in digital games as well as the largest and most competitive content provider. And these are enough. " Chen explained the direction of his grand plan.

Data showed that by the end of 2004, there are about 100 million PCs and 300 million mobile phones in use in China. There are also 370 million TV sets in use. Though the strong growth trend in online advertising, the combined advertisement revenue from the top three portals is only about a few hunderd million dollars. Even you count in mobile, games, and other revenue together, it is only about serveral billion dollars. However, according to conservative analysis from State Bureau of Broadcasting, with the users approaching 100 million, advertisement alone can achieve a market capacity as big as $12.5 billion.

"Many people have forseen this market earlier", Chen said. Microsoft started the "Venus plan"(a failed Microsoft strategic plan designed for China) and XBOX as early as 1999, and has been making continous efforts. Shanda's goal is is to combine games with television. In other words, whenever you turn on your TV set, you will be connected with 350 Million registered Shanda users through internet.

Shanda, Microsoft, Sina, and Changhong

Chen knows that Shanda can never own this market. It is just impossible. "Shanda's advantage is in providing digital entertainment. Anything else is other people's job", said Chen. "Such as movie and music, we can collaborate with the related groups. We can collaborate with Tencent on VoIP, and Baidu on Search, and we can also colloborate with Sina on news.

Chen's grand plan is that: Intel making chips, Microsoft making operation systems, Changhong making set-top boxes, and Shanda providing digital entertainment, Radio and TV stations providing movie and VOD, Sina providing news coverage as well as advertisement. All these things are then integrated into a small box and connected to Shanda's huge and well organized sales and marketing platform. Can you imagine how big an impact it will bring?

In yesterday's conversation with the media, Chen admitted first time Shanda and Microsoft "are discussing collaborations related to XBOX". At the same time, he admitted that he indeed said he "was going to have coffee with Bill Gates during a trip to the US close to the holiday season". He also said that: "Shanda has been communicating with Microsoft on strategic collaborations. I can't exclude the possibility that both sides can further our collaborations on XBOX and MidiaCenter".

"As to the set-top boxes, Shanda has no plan to make them ourselve", Chen said. "It is just a box, we can leave them to more specialized partners such as Changhong, TCL, Konka or Haier to make them."

Wu Peng


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