Shanda Games Limited (GAME)

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Shanda Games Ltd (GAME)

Q2 2013 Earnings Conference Call

August 28, 2013 9:00 p.m. ET


Ellen Chiu – IR Director

Xiangdong Zhang – CEO

Richard Wei – CFO


Timothy Chan – Morgan Stanley

George Meng – Macquarie

Wendy Huang – Standard Chartered

Mark Marostica – Piper Jaffray

Thomas Chong – BOCI

Andy Yeung – Oppenheimer



Welcome to Shanda Games Limited's Second Quarter 2013 Financial Results Conference Call.

The conference call will be recorded and available for replay in its entirety. A copy of Shanda Games 2013 second quarter results announcement can be found and downloaded from its Investor Relations website,

(Operator Instructions). I would now like to turn the call over to Ellen Chiu, Shanda Games Investor Relations Director. Please proceed, ma'am.

Ellen Chiu

Thank you. Good morning and good evening everyone. On behalf of Shanda Games, I would like to welcome everyone to our 2013 second quarter financial results conference call. With me today are Mr. Xiangdong Zhang, our CEO, and Mr. Richard Wei, our CFO.

Before we begin, I would also like to remind you that management comments during the call will include forward-looking statements that are based on our current expectations and are intended to qualify for the Safe Harbor from liability for such statements established in the US Private Securities Litigation Reform Act of 1995.

All statements other than statements of historical fact during the conference call are forward-looking statements which are subject to significant risks and uncertainties. Actual results may differ materially from those contained in the forward-looking statements. So please to take a minute to read the Safe Harbor statement in Shanda Games' second quarter results 2013 earnings release.

In addition, please note, for discussion purposes, all numbers were translated into US dollars based on the exchange rate of RMB6.1787 per US dollar.

Now I would like to turn the call over to our CEO, Mr. Xiangdong Zhang.

Xiangdong Zhang

Thank you, Ellen, and thank you for joining us today. As I mentioned on our last earnings call, we had a solid start to the year, particularly in our mobile games segment, an area that has become one of our main strategy focuses. With the acquisition of the operating and distribution platform,, our mobile strategy has become more focused. As we start to integrate and mobilize this platform, we expect to create synergies and facilitate the launch and operating of future mobile games by leveraging this platform.

Early last month we successfully launched Million Arthur in China where it immediately became the second top-grossing app across all categories on Apple's App Store in China on its first day. Through an extensive marketing effort and the strengthening of our platform, we are able to directly reach out to our target audience. We will continue to add new content to prolong the game's lifecycle by leveraging our expertise in MMO games.

In addition to China, we are now looking for opportunities to bring to new markets such as Singapore and Malaysia. The game contributed 9% of total revenue during the second quarter, which does not include revenue contribution from China. We hope to continue to build upon the success of Million Arthur with 36 new mobile games in the pipeline, including the mobile version of Dragon Nest, Guardian Cross and Hell Lord.

Last week we announced the launch of mobile platform G-Home. We believe G-Home represents an important milestone in our mobile game development as we work to convert our substantial MMO user base to mobile user base.

G-Home is a consolidated mobile platform that encompasses various functions including unique password, unique virtual currency, custom service, G-Q social community, and G-Games. Through G-Home, we believe we can efficiently reach out to new and current users as we create a sticky mobile community around them, positioning itself as a flagship games center.

G-Home will vertically integrate higher-end users, high-quality content and a premier service. We plan to publish all in the top 1% of mobile games selected from the market. With G-Home, users will no longer face the dilemma of choosing one game out of millions and will be able to easily locate games that appeal to them through the various functions the platform offers.

In addition, the user base and the publish and distribution functions the platform as well aid our game portfolio in reaching a high hit ratio without the additional promotional cost. (inaudible) reach of audience, G-Home also plans to collaborate with third-party platforms and markets through revenue-sharing arrangements or to allow users to access G-Home directly on third-party platforms.

It is true that mobile games tend to have shorter lifecycles than traditional MMO games. But they are also less culture-oriented and can cater to a large audience that often can span across multi markets. Therefore, a fully comprehensive mobile platform plays a much bigger role than any individual title in successfully launched mobile games.

We believe our mobile games revenue will grow steadily with the launch of numerous titles on G-Home in China, South Korea, Taiwan and Singapore going forward.

On the back of Million Arthur's launch in China, we expect our mobile games revenue to grow approximately 50% Q-to-Q in the third quarter and account over 10% of total revenue. Moreover, we will leverage our G-Home mobile platform to accumulate users and make it into a cross-promotion platform.

The cross-platform promotional events will be held as we facilitate (inaudible) the service for MMO games through a unique password. We believe that G-Home will aid us in broadening our MMO user base and growing revenue as we remove the barriers between our MMO and mobile users. We aim to attract 50% of our MMO users to G-Home by the end of this year.

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