Terra’s new game plan

Terra’s new game plan

S. Jai Shankar

WHEN Malaysian Debt Ventures Bhd (MDV) extended a hefty RM61 million loan

to Terra ICT Sdn Bhd, an online gaming company, in June last year, it

raised many eyebrows. Should a gaming company deserve such priority

considering there are more viable business models?

While the critics were still sniping, Terra ICT had made good use of the

money. According to Tom Tamura, the company’s Japanese founder and CEO,

the online gaming industry is a huge untapped market that can provide

handsome returns if leveraged correctly. `And we intend to do just that,’

he says. Market research firm IDC says the industry is expected to be

worth about US$1.8 billion by 2005, up from US$210 million in 2001.

Jupiter Research is also upbeat with predictions valuing the online gaming

market to reach about US$2.55 billion in 2006. The most upbeat forecast

comes from consulting firm Forrester Research, which projects that online

game revenues will more than double each year until 2005, to reach total

sales of US$4.3 billion.

While the potential is there, Terra ICT needed capital injection and the

right environment to operate in. That’s when Malaysia came into the

picture. According to Tamura, Malaysia was chosen as the base due to

various reasons. For one thing, what many people don’t know is that Tamura

is an old hand in doing business in Malaysia. His first foray into the

Malaysian business world was back in the 1960s. `I was a trading agent for

my employers in Japan and handled the Malaysian account. I generally sold

fishing nets,’ he says with a smile.

From then onwards, Tamura has kept an eye on Malaysia. When the

opportunity came to place his company on proper footing to launch the

online games model, it didn’t take him long to decide on Malaysia. `We

were considering Singapore as a possible long term base but decided

against it after considering MDV’s attractive financial and non- financial

incentives,’ he says. The fact that the MDV fund is a Malaysian- Japanese

collaboration probably helped to tilt the odds further. MDV is a company

wholly owned by the Minister of Finance Inc. It offers project debt-

financing, focusing on high-value added ICT and high growth sectors,

through its RM1.6 billion ICT fund provided by the Japanese Government.

Terra ICT was incorporated in February 2003. It is owned 31% by Terra

Corporation of Japan, a global technology and Internet-based solution

provider with interests in Japan, South Korea and the United States.

Another 20% stake is held by listed local turnkey contractor Bintai Kinden

Corp Bhd.

A bulk of the loan incidentally went towards the creation of what Terra

ICT claims is be the world’s first massive multi-player online game

portal. There are also concerted steps to expand the company’s line of

products to ensure it will have the largest online games list in the

future. It has the exclusive distribution and hosting rights within the

Southeast Asian region for 15 titles, and plans to increase the figure to

30-40 by 2005. Every year, three to four new titles will be developed

wholly in Malaysia while the rest will come from global developers. The

current range of titles are basically developed in South Korea but

customised for the regional and global market. The products are mainly

customised into English and Mandarin.

The genre ranges, among others, according to age groups. The range

includes musical, first person shooter, and sports simulation. However,

none of the titles are rated as violent as Terra ICT has a policy against

such titles. `We don’t believe in selling any product which promotes

violence. We prefer strategy-based games,’ Tamura says. Seven of the games

can be played from the www.e-games.com.my portal. The remaining eight

would be made available from June onwards. The portal is also expected to

serve as a platform for games developers in Southeast Asia to market their

products. Terra ICT is also involved in portal development, game

development and creation of intellectual properties.

Terra, which currently has 60 employees, expects one million subscribers

for its online game portal by 2005. The company has started offering

selected South Korean online game titles in English to gamers in Malaysia,

Singapore, Indonesia, the Philippines, Thailand and Vietnam in order to

quickly build a substantial regional customer base.

The distribution channel would primarily involve cybercafes. According

to Tamura, the company is hoping to attract at least 1,000 cybercafes to

its alliance programme. `We are in the midst of negotiating with various

cybercafes to find the right formula that can ensure a win-win proposition

for all,’ he says. It would also be leveraging on advertising and

promotional activities to drive up its subscription base.

Tamura is enthusiastic about the future prospect. One of the reasons for

the optimism is the increase in broadband penetration in Malaysia and

across the region. `That is the impetus that will drive us forward,’ he

says. The increase in uptake will facilitate the company’s push towards

massive multiplayer online role-playing games (MMORPGs). Such models are

big in countries where the broadband penetration is huge such as South

Korea and Japan. The former has the largest broadband deployment per

capita in the world, with about 60% of households with broadband. South

Korea is currently the biggest online game market in Asia with revenue

from online games surging from US$8 million in 1997 to US$465 million in

2002. Not surprisingly, Terra ICT is focusing a lot on developing MMORPGs

to keep itself at the forefront of the online games industry.

Growth is also likely to escalate in coming years as the population for

broadband users continues to expand. The current number of broadband users

in Malaysia, which stands at 100,000, constitutes less than 1% of the

total population.

Online games are also expected to grow significantly as it could

circumvent the piracy problem that often plagues offline game developers.

In the case of online games, revenues are driven by subscriptions and not

sales. Furthermore, well-equipped cybercafes, which have mushroomed across

the region, provide the distribution platform that mitigates other

hardware related problems. Tamura notes that gamers these days don’t have

to constantly buy newer and faster machines or subscribe to broadband

services at home to keep abreast with the systems demands of online games.

However, Terra ICT should be wary of competition, which is ever growing.

Over the last few months, many local companies have shown interest in the

market segment. This includes two Mesdaq listed companies, namely MOL

AccessPortal Bhd and FTEC Resources Bhd. Furthermore, due to the nature of

the business models, Terra ICT should expect stiff competition from

incumbent players in the market, especially those from the United States

and South Korea.

To counter the competition, Terra ICT is mulling over the possibility of

sourcing a second round of funding from MDV. It is also planning for a

possible Mesdaq listing by 2005. This would give it the requisite

financial muscle and credibility to truly become a global player in time

to come.

Online games have in many ways revolutionised the interactive

entertainment industry and created an important new source of revenue and

gamers. Most industry analysts agree that online games will continue to

grow in raw usage, and will generate significant revenues. Terra ICT

simply wants to become a significant player in the world of games.

Copyright 2004

Provided by ProQuest Information and Learning Company. All rights Reserved.