Internet & Tech

Game over

Iconic console firm files for bankruptcy

Duan Yongping-w

Duan: former general manager

When older gamers in the Western world think back to the industry’s origins, there’s often an American company at the forefront: Atari, with its legendary games such as Pong, Pac-Man and Space Invaders. When their Chinese equivalents are feeling nostalgic, there’s another company that springs to mind, Xiaobawang (or Subor in English).

What Silicon Valley was to the development of the Western gaming industry, so the city of Zhongshan in Guangdong province has been to China’s. And Chinese gamers – or rather their fathers – are in a sentimental mood after Xiaobawang entered the bankruptcy courts.

Back in the late 1980s the company provided Chinese children with their first gaming experience through a product that effectively ripped off the Nintendo Entertainment System’s eight-bit video console. Even better, it could play pirated versions of Nintendo’s games. “You know you’re not young anymore if you still remember one of Jackie Chan’s adverts for Xiaobawang,” recalled one netizen.

Many of those older fans have been surprised to discover that the brand still existed 30 or so years later. Yet its final demise is symbolic, in showing how China’s economy has evolved since Xiaobawang first made its mark. In many ways its first console was one of the original shanzhai products (the term in China for a copycat; see WiC1) and gave its general manager, Duan Yongping his start (see WiC409).

In a suitable irony, the company’s name was the same as the nickname of a character in the classic Chinese novel The Water Margin: Zhou Tong, a bandit chief.

Duan has often piggybacked on other people’s inventions and products. His career trajectory has consequently tracked China’s climb up the value chain. At Xiaobawang he was at the forefront of an industry that wasn’t troubled by provisions protecting intellectual property. After he left in 1995, he founded BBK, the parent company behind mobile phone brands OPPO, Vivo and OnePlus. This time there wasn’t any pirating as such, just the production of hugely successful, lower-cost alternatives to global smartphone brands like Apple and Samsung.

In 2015 Duan was one of the first four angel investors behind Pinduoduo, then known as the ‘poor man’s Alibaba’. By this point, China’s economy had progressed to a level where there was room for lower-cost rivals to domestic champions and not just international rivals.

Duan is unapologetic about his business strategy in following others. “My business is not initiating. Instead, I analyse the vulnerabilities of leading companies in certain industries and then try to establish my own stronghold.”

Duan left Xiaobawang on good terms, gifted a Mercedes-Benz by Chen Jianren, the founder of its owner, Yi Hua Holdings. But the company went into decline following his departure. It had previously been capturing as much as 80% of China’s console market by appealing to parents: cleverly positioning its product as a “study machine” rather than a games console. However, in 2000, the Chinese government, worried about addiction to gameplaying, banned consoles completely.

Globally, Microsoft’s Xbox, Sony’s Playstation and Nintendo’s Wii (more recently called Switch) were proving extremely popular. But the sector in China started to chart a different course, with PC and mobile gaming taking off under the aegis of new companies like Tencent.

The government lifted its console ban at the end of 2014 and the global giants have tried to return. But they have never been able to establish much of a foothold and Yi Hua was unable to resuscitate Xiaobawang too.

Now it’s in a bankruptcy battle, claiming that only one of a number of subsidiaries that licenced the brand has gone bust. However, in September the Hong Kong courts ordered Yi Hua Holdings to be wound up, with the Chinese media pinning most of its troubles on the capex ploughed into a new virtual reality unit, with a plan to develop a VR console in association with US semiconductor company AMD.

As one netizen concluded: “Childhood memories aren’t enough. The company didn’t have any core technology and without financial support, its re-emergence was just not possible.”

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