) online gaming subsidiary
) recently announced the open beta version of the upcoming new game
Players will be able to access the game from May 24, 2012
Based on the legends of the Three Kingdom period,
is a turn-based massively multiplayer online role-playing game
(MMORPG) developed by using the Unreal 3 game engine. In turn-based
games fights between players take place in turns. Turn-based games
are more strategic in nature as they allow players to choose their
mode of attack and defense. However, turn-based games are much
slower than action games.
, players are allowed to pick their positions in a 3X5 grid, where
they place their characters. Unlike traditional turn-based games,
the game features a time-keeping meter, which determines the turn
of each character during the combat. Players are expected to keep
pace with the time-meter to grab their opportunities to attack or
Changyou expects this new variation in
to attract new players, thereby expanding its subscriber base going
forward. Changyou has a dominant position in the Chinese online
gaming industry (Changyou operates
Tian Long Ba Bu
, one of the most popular massively multi-player online games in
, one of the top-ranking web-based games in China), which will help
the new game to solidify its position going forward.
Online gaming, which includes MMORPG's, casual, social & web
games grew 32% in 2011. Changyou ranked #4 in terms of revenue in
the Chinese market and garnered approximately $485.0 million from
online games. In a recent study from Pearl research, China's online
gaming market is expected to exceed $9.2 billion by 2014 from $6.6
billion in 2011. We believe that Changyou will continue to benefit
from the strong growth trends of online gaming in China over the
Changyou has three more MMO games scheduled to release this year
and four web-based games. We believe that this strong product
pipeline will drive Changyou's as well as Sohu's top-line growth
However, both Changyou and Sohu are facing significant
competition from Tencent,
). This has compelled both the companies to increase spending on
product development and promotional expenses, which is hurting
profitability. Moreover, a slowing Chinese macro environment
(declining auto sales and weakness in real estate) may hurt Sohu's
growth in the near term.
Thus we remain Neutral on Sohu and Changyou over the long term.
Sohu has a Zacks #5 Rank, which implies a Sell rating in the near
term. However, Changyou has a Zacks #3 Rank, which implies a Hold
rating in the near term.
CHANGYOU.COM (CYOU): Free Stock Analysis Report
SHANDA GAME-ADR (GAME): Free Stock Analysis
RENREN INC-ADR (RENN): Free Stock Analysis
SOHU.COM INC (SOHU): Free Stock Analysis Report
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