Chinese Character

Games Master

Chen Tianqiao and the rise of Shanda Interactive

“Money itself doesn’t mean much to me,” says Chen Tianqiao. “I just think by making more money, I’ll be able to prove that I’m more capable than others.”

Chen often says wealth has never been his ultimate goal. To him, making the country’s rich list is like scoring points in an online game.

That’s an appropriate analogy since Chen is the chief executive and chairman of Shanda Interactive Entertainment, a Chinese online gaming firm. He first made it onto Hurun’s China Rich List at the age of 30. Last year Chen (and his family) ranked number 34 with an estimated worth of $2.5 billion.

An ambitious student – Chen graduated a year early from Fudan University in 1995 – he quickly tired of working for others.

In 1999 at the age of 26, he founded his company with half a million yuan (saved mainly from stock investments) with his younger brother.

The company had four divisions: animation, comics, games and peripherals. Two years later, online games was the only business they decided to stick with.

“A business needs to be focused in order to succeed… One common mistake made by entrepreneurs, including myself, was to start with a diversified or indecisive strategy, rather than focusing on one specific area and seeking breakthrough,” Chen told Southern People Weekly last month.

With the $300,000 the company was left with (after its strategic investor ChinaNet exited), it bought the distribution rights for The Legend of Mir 2, an online game originally developed by Korean firm Actoz. Having secured the rights for the game, Chen went on to ask Dell and Netease for the use of their servers on a two-month trial basis, and with that deal then secured another agreement with China Telecom to use its bandwidth for free for the same period.

The Legend of Mir 2 turned out to be hugely popular and Shanda got its full return on investment within the first few months of the launch. It also helped Shanda set a record of 600,000 simultaneous users online within the first year.

Chen was determined not to miss out on the chance of pushing the company forward after his initial success. “There is no such thing as a misstep; it is always about the question of timing.”

The company secured $40 million worth of financing from Softbank Asia in 2003. In the same year it launched its own game The World of Legend, which led to copyright infringement lawsuits with Actoz. The case was settled by Shanda acquiring a 29% stake in Actoz.

In 2004, Shanda was listed on Nasdaq. The company also bought an online literature portal called Qidian, while adding other new online games to its portfolio.

By now, Shanda had carried out nearly a dozen acquisitions at home and abroad and in 2004 it set a record in undertaking six capital raising exercises in just two months. Also around this time, Chen became one of the richest men in China, and Shanda the largest online games provider in the country.

But Chen didn’t slow down. “A corporation needs to undergo five different phases: first, to find a breakthrough in its strategy; second, to focus; third, to integrate the supply chain; four, to seek appropriate diversification, and finally to become a socially responsible corporation,” is another of his comments to Southern People Weekly.

In 2005, Shanda made its multiplayer online role-paying games Magical Land and the World of Legend free of charge (but charging for other items such as weapons and magic potions used in the game). Other industry players soon adopted the model, known as come-stay-play (CSP).

Chen always knew that successes in the intensely competitive games industry can be ephemeral. In the second quarter of 2009, Tencent overtook Shanda as China’s largest online games provider by recording online games revenue of Rmb1.24 billion ($181 million), outperforming Shanda’s Rmb1.18 billion.

In fact, Chen had been quietly mapping his strategy in order to stay on top of his game. He formed Shanda Literature in 2008 as part of an integration of the online literature assets it had acquired over the years, including Qidian. Today, Shanda Literature controls over 80% share of the online literature market (see WiC 11).

Next up is online music. In June, Shanda acquired a 51% stake in Hurray Holdings for $46.2 million. Hurray is a mainland provider of music and music-related products like ringtones for mobile devices.

Chen then moved on to form a $88 million joint venture with Hunan TV, which will produce online movies and TV series. In the same year, he bought ku6.com, the country’s third largest online video site, for $44 million (see WiC45).

Analysts reckon the deals will help Shanda diversify from an online gaming company to a large internet entertainment giant. Chen’s online empire now includes games, movie, music, literature, and television, says the Economic Observer.

“By shifting to more diversified entertainment platforms, the company aims to better integrate its content resources, offer customers more choices and expand revenue streams,” says Cao Fei, analyst at research firm Analysys International.

But it hasn’t all gone Chen’s way. Five years ago he invested a lot of time and energy in creating a set-top box that would allow televisions to connect to the internet and access his content. But he had misjudged the regulatory landscape and was told in April 2006 that his ‘box’ wouldn’t be permitted.

For many years Chen lived somewhat in the shadow of Tang Jun, the charismatic ex-boss of Microsoft China who he brought in to be CEO. Indeed, much of the credit for Shanda’s successful listing on Nasdaq was given to Tang (see WiC16, Chinese Character). Tang – nicknamed the King of the Dagong (a term meaning ‘one who works for other people’) – is often regarded as the country’s most successful ‘professional’ manager. While both men worked well together it has only been more recently – with Tang’s departure to run New Huadu – that attention has refocused on Chen’s leadership role at Shanda.

Surprisingly, he doesn’t play video games himself.

“A chef who loves eating hongshaorou (braised pork), may not be capable of preparing the dish to the liking of his customers. My strength is that I understand the taste of the users and I know how to find ways outside the games to fulfill their desire for an ever-changing experience,” Chen reveals, quoting Mao’s favourite dish (see last week’s issue, Fast Food).

While he shrugged off the ‘China Top Richman’ title he won in 2004, he appears to be keen on making his own legend. Forbes recently included Chen on a list of young businessmen around the world that could become the ‘Next Bill Gates’. But as far back as 2005, Chen had told the magazine “I respect Bill Gates, but I want to be China’s Chen Tianqiao, not China’s Bill Gates.”


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