(Content originally published on Ecns.cn 13/10/2014 - see original at http://www.ecns.cn/business/2014/10-13/138083.shtml/)
The challenge of piracy and the prevalence of free-to-play gaming in China may seem a great barrier for many foreign companies to even attempt entering the market, but for Eutechnyx, a company in Gateshead, northeast England, it was a catalyst to design new approaches and revolutionize its group business model.
Eutechnyx, founded 27 years ago, is a computer and video games developer that specializes in racing games, the most widely known being Auto Club Revolution and NASCAR (National Association for Stock Car Racing).
"When we first went to China we were focused mostly on console games, which sell for about $60 each," says CEO Darren Jobling. "We saw that China was pioneering free-to-play and that our old business model wasn't relevant there.
"We saw the potential of free-to-play both in China and in the rest of the world. We invested in China and in building a new business model that we are now using internationally."
Whereas console games are sold retail, free-to-play games allow about 90 percent of customers to play free of charge. The rest are the cash-rich, time-poor willing to pay a lot to skip a game's lower levels to play at the higher levels.
The shift in the Eutechnyx business model is one way in which Jobling's team demonstrated great flexibility in expanding into the Chinese market. Establishing a Chengdu design studio is another.
In 2007, Executive Chairman Brian Jobling took part in a UK government delegation trip to explore opportunities in China and met representatives of the Chinese game developer CP Soft.
"We had a good discussion and liked what each other did," Jobling says, adding that he expressed an interest to work with CP Soft before returning to England, although without putting a timeline on it.
A month after returning, CP Soft contacted him. "They said they had created a studio for us in Chengdu, and recruited the right talent to participate. They asked us to go and take a look."
Jobling was happy with what he saw, and two months later Eutechnyx and CP Soft set up a joint venture company in Chengdu, Eutechnyx being the majority shareholder.
The work force has now grown to more than 30 employees, who specialize in graphical 3D modeling for vehicles and environment. Their work complements the work of Eutechnyx's UK team, which has more than 70 people working on game development and graphic design.
The spread of workers across the two locations also means coordination between the two teams allows jobs to be worked on around the clock and finished more quickly.
Jobling says he is impressed by the level of talent in China's graphical 3D modeling industry for computer games.
"In the niche market we focus in, there are 5,000 people employed in the games industry in Chengdu. I'm not sure if we even have that many in the whole of the UK."
Eutechnyx has invested millions of pounds in its Chengdu business, he says, a lot of it going into training, including sending both countries' workers overseas to see and work alongside one another.
"We are a great believer in China's gaming market. At the moment we are doing graphical 3D modelling for games in China for the global market, but we want to target China's domestic market more in the future."
Eutechnyx plans to launch its Auto Club Revolution in China next year in partnership with the Chinese game publisher KongZhong.
KongZhong, listed on Nasdaq, is a leading game publisher in China well known for Guild Wars 2. The partnership means KongZhong can help Eutechnyx correctly position ACR in China, market it and take care of other logistics details to ensure Chinese consumers receive the right experience.
Once launched, ACR will become the first racing game in China to feature fully licensed real-world cars and tracks. Although China already has many racing games, these games do not use real cars, but Eutechnyx is keen to do business in China in the proper way.
ACR allows players to choose their own car for a race, the experience being very similar to real-life racing because of the game's graphics and sound.
To help Chinese gamers feel more connected to ACR, Eutechnyx has developed a Shanghai track that features surrounding images taken from Shanghai.
Eutechnyx announced the Shanghai track earlier this year to coincide with the announcement of its partnership with KongZhong, at ChinaJoy, an industry event.
The Shanghai track will be available to players worldwide when an upgraded version of ACR is released in future.
Nancy Zhang, marketing director of KongZhong, says it looks forward to ACR being launched in China.
"We have a huge user group of racing console games there, but there are no client racing games. We have never doubted that ACR will be highly popular in China, particularly given that the cars are licensed by the car firms."
Eutechnyx, founded in 1987, has recently set up another business, ZeroLight, which uses Eutechnyx's graphical 3D modeling and game development expertise and technology to fulfill other functions for commercial and retail customers.
Examples of ZeroLight's work include designing virtual car showrooms so the buyer of a car receives life-like experience and can customize and interact with a car on screen just as they can with the real vehicle. ZeroLight also works on projects for environment design and visualization that includes airline seat configuration design, interior design, architectural design and city planning, all of which can be seen on 4K UltraHD screens or in virtual reality headsets.
Last year, ZeroLight worked with Jaguar Land Rover to design a virtual showroom experience for a new model of the car.
The design allows users to point at a screen as if they are touching their car and making it perform functions.