Evaluation of Developing Electronic Sports Business in Chinese Game Market - The case of Valve s game of CSGO

Coventry University Teng Ma
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Coventry University
MSc Engineering Business Management
M99EKM: Master Dissertation
Evaluation of Developing Electronic Sports
Business in Chinese Games Market – the
case of Valve’s game of CS: GO
Student Name: Teng Ma
Student ID: 5334427
Submission Date: 18th
August 2014
Supervisor: Xue Zhou

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Declaration of Originality
This project is all my own work and has not been copied in part or in whole from any other source
except where duly acknowledged. As such, all use of previously published work (from books, journals,
magazines, internet etc.) Has been acknowledged within the main report to an item in the References
or Bibliography lists.
I also agree that an electronic copy of this project may be stored and used for the purposes of
Plagiarism prevention and detection.
Copyright Acknowledgement
I acknowledge that the copyright of this project report, and any product developed as part of the
project, belong to Coventry University.
Signed (electronically): Teng Ma Date: 18th
August 2014
_____ _____

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Abstract
As society and technology develops, computer and video games are increasingly popular. It has
become part of daily life, competitive computer gaming is now becoming as a fundamental element
in the culture of gaming. In this dissertation, author will argue that electronic sports industry can be
developed in the Chinese market by following the strategies used in South Korea; the criteria for
developing successful electronic sports business in China. Then to critical evaluate features of
successful game business in case study, and list out the characteristic. After that, the project is going
to analyse the feasibility of an American game company ‘Valve’ to import the game – ‘Counter strike:
Global offensive’ into Chinese market. At the end, to provide the recommendations and plans for
publishing and developing game of ‘Counter strike: Global offensive’ into the Chinese eSports
business market.
Keywords: Strategy, Business Intelligence, computer games, electronic sports, games market
Topic area: Innovation, Engineering strategy

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Acknowledgements
 Special thanks to Dr Xue Zhou for her professional guidance and her patience in supervision.
 Special thanks to Dr Xue Zhou’s “Strategic Management and Leadership in Technology
Organisations” lecture notes.
 Special thanks to Dr Phil Thompson for his professional guidance and his patience in supervision.
 I would like to thanks all my family and friends for all the support they gave me throughout the
project.

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Contents Page
Contents
Declaration of Originality....................................................................................................................2
Abstract ................................................................................................................................................3
Acknowledgements..............................................................................................................................4
Contents Page.......................................................................................................................................5
List of Figures ......................................................................................................................................7
List of Tables .......................................................................................................................................7
CHAPTER ONE: Introduction ........................................................................................................8
1.0 Introduction of Electronic Sports...................................................................................................8
1.1 Electronic Sports Market Introduction...........................................................................................8
1.2 Aims & Objectives.......................................................................................................................10
1.3 Structure of Study ........................................................................................................................12
CHAPTER TWO: Literature Review............................................................................................14
2.1 A Brief Presentation of Electronic Sports....................................................................................14
2.2 General Overview of the Two Most Famous eSports Games and the Effectiveness of China....21
2.3 Case study – The Most Successful South Korean Game in the Chinese eSports Market –
CrossFire............................................................................................................................................26
2.4 Case study – South Korean Electronic Sports from Four Dimensions........................................32
2.5 Success Factors for Developing the eSports Business in China ..................................................37
CHAPTER THREE: Research and Methodology ........................................................................39
3.1 Introduction..................................................................................................................................39
3.2 Research Approaches...................................................................................................................39
3.3 Research Strategies ......................................................................................................................41
3.4 Data Collection ............................................................................................................................43
3.5 Ethical Considerations .................................................................................................................44
3.6 Summary......................................................................................................................................45
CHAPTER FOUR: Data Analysis & Discussion ..........................................................................46
4.1 Chinese Electronic Sports Macro Environment Analysis by PEST ............................................46
4.2 Chinese Electronic Sports Industry Micro Environment Analysis by Porter’s Five Forces........55
4.3 SWOT Analysis on Valve Software Company’s Game – Counter-Strike: Global Offensive.....65
CHAPTER FIVE: Criteria Evaluation..........................................................................................71
5.1 Current Situation of Chinese eSports from an External Perspective and of Valve’s CSGO from
an Internal Perspective.......................................................................................................................71
5.2 Criteria checking table .................................................................................................................73

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CHAPTER SIX: Recommendations...............................................................................................75
6.1 Recommendations on Development of Chinese Electronic Sports in External Environment.....75
6.2 Recommendations for Developing the FPS game - ‘Counter-Strike: Global Offensive’ in the
Chinese Games Market ......................................................................................................................77
CHAPTER SEVEN: Conclusions...................................................................................................80
7.1 Conclusions..................................................................................................................................80
7.2 Critical Reflections ......................................................................................................................81
7.3 Further Research and Work .........................................................................................................82
References.........................................................................................................................................83
Appendix I – Project management.....................................................................................................93
Appendix II – Ethics Approval ..........................................................................................................98
Appendix III – Critical Evaluation of Performance & Conduct ......................................................101

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List of Figures
Figure 2.1.1 Game screenshot from game: Counter-Strike
Figure 2.1.2 Game screenshot from game: StarCraft II & a professional player’s game playing
Figure 2.1.3 Gaming gear prices on Amazon.co.uk
Figure 2.1.4 Professional basketball sneakers price list on Nike Store UK
Figure 2.1.5 Alienware Aurora PC price list
Figure 2.2.2 DotA 2 population growth trend from 2012 to 2014
Figure 2.3.1 the top 10 online games, based on free-to-play earnings
Figure 2.3.2 list of Prize pool – ‘CF hundreds of cities championships 2014’
Figure 2.3.3 Price list in game of CrossFire
Figure 2.3.4 The lowest price of a performance gaming desktop
Chart 2.2.1 Chinese games customers’ daily choices in 2013
List of Tables
Table 4.1.5 PEST Analysis Table
Table 4.2.6 Porter’s Five Forces Analysis Table
Table 4.3.5 SWOT Analysis Table
Table 5.2 Criteria Checking Table

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CHAPTER ONE: Introduction
1.0 Introduction of Electronic Sports
As society develops, computer and video games are increasingly popular; they are becoming a part
of daily life, and according to one statistical report approximately 20% of people in the world play
games every day (Spil Games 2013). To win competitive games is the main goal of gaming, especially
for games enthusiasts and professional game players. In 1999, the English Sports Council recognized
and named competitive computer gaming an official sport (Knox 1999). Competitive computer
gaming is increasingly becoming a fundamental element in the culture of gaming.
The name electronic sports (eSports) comes from competitive computer games or video games. The
term refers to when players are playing against each other in a fair environment, using high-tech
hardware and software instead of normal sports equipment to create a confrontation between
players’ intellectuality and torso-flexibility. By playing eSports, people could improve their ability in
thinking, willpower, responsiveness, and teamwork.
1.1 Electronic Sports Market Introduction
As technical social develops, video games become indispensable to people's lives entertainment.
According to a Spil Games report (Spil Games 2013), at the end of 2013, the total number of people
in the world who play games is approximately 1.2 billion; with a total world population standing at
7.1 billion, randomly two people in a group of ten are video games players. Moreover, the current
global games market is worth than 70.4 billion US dollars, and is continuously growing by 6% per
year. This games market is new and emerging with considerable potential. In South Korea especially,
eSports is one of the country’s three major sports. Development of eSports helped South Korea to
restore and revitalize its national economy after the Asian financial crisis in July 1997 (Dick 1998).
According to data provided by the Korea Creative Content Agency (Tech in Asia 2013), the total
South Korean games market was worth 9.16 million US dollars in 2013 with 10.8% market growth

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per year, which is 15% of the total world games market, and with a higher market growth rate. The
data could be explained by the fact that South Korea has been developing the eSports market
successfully as a major national industry, and the case in South Korea could possibly be a good
example and a market framework for other countries to study and reference. The present project is
going to evaluate and analyse the methods of running the games market in South Korea, and the
strategy provided by the South Korean government.
In addition, in America eSports is still treated as a non-official sport, but the discussion that ‘eSports
should be one of the official sports’ has never been stopped by American domestic players (3dgame
2014). Recently, the United States ESPN TV programme made an agreement that eSports should be
more normalised and codified in the same way as the traditional sports. ESPN has been co-operating
with the American eSports league, MLG, to broadcast electronic games on TV, starting by June of
2014. The ambitions and actions of ESPN show that eSports could be integrated into public
entertainment on TV, and the market is going to expand rapidly.
On the other hand, China made 6.8 billion US dollars in the games market in 2012 (PCGA 2012). With
the highest population of any country, China had approximately 340 million people who played
games in 2013 (CNNIC 2014), and more than 135,000 internet cafes in 2012 (Kotaku 2013). China
has large scale internet use and games customers; there are many games resources, and high
potential profits in the Chinese games market, but also the market is diverse and complex. To
compare with the games market in South Korea, China has been making progress with developing
the games market. However, there are many limitations and barriers which keep pulling progress
back, such as parents/guardians, family education, age restrictions by government, the regulations
and licenses of internet cafes, the few large scale sponsors and organizations for Chinese eSports,
and the small amount of benefits and salary for domestic eSports players in China. A business report
(DoNews 2013) shows that in China, 93% of eSports players have a monthly income of only around
150 GBP, which is very difficult to live on. However, in other words, the 93% of eSports players with
low wages in China means that the cost of labour in the Chinese electronic sports market is low
compared with South Korea and the USA. As a result, the Chinese electronic sports market is simple

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and cheaper to enter in terms of the investment needed; and China has a large amount of potential
players with a huge passion for gaming.
This dissertation will point out that South Korea has had highly successful operations in the
electronic sports business. It will also be argued that the electronic sports industry can be developed
in the Chinese market by following the strategies used in South Korea. The dissertation will establish
criteria for developing successful eSports businesses in China Then, the features of successful games
businesses will be critically evaluated by means of case studies, and the characteristics will be listed.
After that, the project will analyse the feasibility of an American games company, ‘Valve’, importing
the game ‘Counter-Strike: Global Offensive’ into the Chinese market. Finally, the dissertation will
provide recommendations and plans for publishing and developing the latter game into the Chinese
eSports market.
1.2 Aims & Objectives
Aims
To evaluate the feasibility of publishing and developing game of ‘Counter strike: Global offensive’ in
the Chinese games market by critical analysing the criteria from successful South Korean eSports
market strategy and case study of successful electronic sports games businesses.
Objectives
1) To overview general information about eSports, includes theoretical definition, similarity and
comparisons between electronic sports and traditional sports, eSports players’ self-
actualization and so on.
2) To general overview the two of most famous eSports games in China, includes game genres,
popularity, sales and profit from the companies, events and tournaments which they were hold.
3) To investigate the effectiveness on Chinese eSports condition by these two of most famous
eSports games.
4) To investigate the major business achievements had been done by the most successful game in
China.

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5) To investigate eSports industry in South Korean market from four dimensions: Politics,
economic, social and technological. To summarised successful factors for developing eSports
industry in Chinese game market.
6) To investigate and analyse the macro environment of eSports in Chinese games market, with
four dimensions: Politics, economic, social and technological.
7) To investigate the micro environment of the Chinese eSports industry by porter’ five forces
analysis, and also according to the existing criteria and weaknesses, to evaluate the prospects
for Chinese eSports industry.
8) To critical analyse the Valve Software company and the game of ‘Counter Strike: Global
Offensive’ by SWOT analysis, and to evaluate the feasibility of developing the game business in
the Chinese eSports market.
9) To compare and match up the existing criteria with the current Chinese eSports situation which
involve Chinese eSports industry, Valve Software company and the game of ‘Counter Strike:
Global Offensive’.
10) To provide recommendations on development of game of CSGO in Chinese eSports market, and
recommendations on development of Chinese electronic sports in external environment.
Outcomes
1. Literature review on
 Background and general information on eSports.
 General overview on two of most famous eSports games in China
 List of major business achievements had been done by the most successful game in China.
 Investigation of eSports industry in South Korean market from four dimensions
 List of successful factors for developing eSports industry in Chinese game market.
2. Data analysis and discussion on
 Critical investigation and analysis of macro environment of eSports in Chinese games
market
 Critical investigation and analysis of micro environment of the Chinese eSports industry

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 Critical analysis of the Valve Software company and the game of ‘Counter Strike: Global
Offensive’.
3. Criteria evaluation on
 Comparisons and collection between existing criteria with the current Chinese eSports
situation which involve Chinese eSports industry, Valve Software company and the game
of ‘Counter Strike: Global Offensive’.
4. Recommendations on
 Recommendations on development of Chinese electronic sports in external environment.
 Recommendations on development of eSports game - ‘Counter Strike: Global Offensive’ in
Chinese games market.
1.3 Structure of Study
Introduction
Introduction provides a general presentation about what is ‘electronic sports’, such as point out
that population of eSports players in the world. After that, the introduction is going to present
current electronic sports market, and point out eSports is a high potential market to investigate.
Literature Review
First of all, Literature Review will introduce the theoretical background of Electronic sports, and
point out commons between eSports and traditional sports, then to mentioned eSports players’
self-actualization in Virtual world.
Secondly, the Literature Review will produce the genral overview on the two of most famous
eSports games in China – DotA2 and LOL. After that, there are two case study about the most
successful game in Chinese games market, and South Korean eSports.
According to all information above, the Literature review will be end with listing of successful
factors for developing eSports business in China.
Research and Methodology

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Research and Methodology is going to study the research ‘onion’ (Saunders 2009), and to
understand what each different layer contains. The methodology contains research approaches,
research strategies, data collection and ethical considerations.
Data Analysis and Discussion
Data Analysis and Discussion contain PEST analysis, Porter Five forces analysis and SWOT analysis.
These analysis will be focus on different perspectives, such as macro environment, micro
environment and internal environment.
Criteria Evaluation
Criteria Evaluation is going to sum up all the situations which the Chinese electronic sports market
currently is faced from the Data Analysis and Discussion, and point out the criteria which need to
be match up with successful factors from Literature Review.
Recommendations and Conclusion
According to the Chinese games market and the criteria which sum up from Criteria Evaluation,
author is going to make recommendations for Valve Company’s game – CSGO of investment into
the Chinese games market.

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CHAPTER TWO: Literature Review
2.1 A Brief Presentation of Electronic Sports
2.1.1 Theoretical background of electronic sports
There are many researchers and scholars who have tried to define eSports. The most common view
defines eSports as having the same levels of competitiveness and mental intensity as traditional
sport whether in a physical or a physiological way.
The present report has adopted a definition of eSports by Wanger (2006): ‘“eSports” is an area of
sport activities in which people develop and train mental or physical abilities in the use of
information and communication technologies’. Moreover, Wanger (2006) also mentioned the most
difference between eSports and traditional sport is that a traditional sport requires more physical
fitness. However, nowadays, electronics and digital and communication technology have been
developing rapidly, so it is necessary for people to start to face a new concept of sport, which is that
computer gaming competitions have the same value and competitiveness as traditional sports.
Moreover, Allen Guttmann (1978) presented a model which shows the definitions of and differences
between ‘games’, ‘contests’ and ‘sports’. In particular, he defined ‘sports’ as the highest level of
playing, and requiring intellectual and physical competition at the same time. Jonasson and Thiborg
(2010) mentioned that eSports needs rapid and accurate coordination between the hands and eyes.
eSports is a contest by playing computer games and necessarily requires a high level of intellectual
skill, which is similar to playing chess. However, chess is a purely intellectual sport; eSports demands
intellectual skills and diversified coordination of the human eyes and the reactions of hands and
fingers. Hence, according to the definition of real sport in Guttmann’s model, there is a chance that
eSports could stand on the same level as traditional sports. Jonasson and Thiborg (2010) also
pointed out that eSports could probably have equal calorie-burning to some casual sports such as
Bowling, snooker, horse riding and Frisbee shooting. Hence eSports is becoming more popular and

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more accepted in the young generations’ leisure time, instead of playing traditional competitive
sport with intense physical competition.
2.1.2 Common features of eSports and traditional sports
There are many features in common between eSports and traditional sports. In a traditional sport,
players need to dedicate a large amount of time to training and practising their skills, then players
are able to perform well in real competitive matches against each other.
Players of eSports also have to spend much time on training and practising on the games. A
‘StarCraft’ professional eSports player usually trains 10 hours per day and six days a week; the
training time is much longer than a daily job’s working hours (Cracked 2010). Furthermore, in
eSports games, teamwork is very important and necessary. Before a big tournament, players usually
live together (called boost camp), to practise and coordinate their teamwork and team skills for two
weeks. Mike Rufail, a professional ‘Call of Duty’ eSports player said ‘Training is a lot harder than
people think. Usually, about a week or two before a tournament, everyone hunkers down and is up
all night.’ (ESPN 2012). Hence, eSports and traditional sports both require dedication of time, energy,
and physical power.
Another feature common to eSports and traditional sports is that the age of players has a large
effect and the performance of players decays when the players get older. According to research by
NTES (NTES 2011), nowadays the average age of eSports players is between 16 and 25, which is the
same as the age of traditional professional sports players. When players have reached 25 years old,
their reactions and coordination are becoming slower, so getting old is a disadvantage for both
eSports players and traditional sport players.
eSports players have great talent in gaming
As the previous paragraph mentioned, eSports players spend a great deal of time on training and
practise to be professional and earn victories. Moreover, gaming talent is another important
requirement for being a professional eSports player. A professional eSports player usually has two

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talents: quick response and calm thinking. The most famous first person shooting game – ‘Counter-
Strike’ requires players to have the ability to react quickly, such as aiming and shooting at a target
precisely, accurately and as soon as possible, and then being able to keep alive and defeat their
enemies.
Figure 2.1.1 Game screenshot from game: Counter-Strike
Figure 2.1.2 Game screenshot from game: StarCraft II & a professional player’s game playing
(MoletrapSC2 2012)
The most popular real-time strategy game, ‘StarCraft II’, requires players to have the ability to
coordinate between the fingers on the key board and the mind with calm thinking. In the StarCraft
game, players usually have to control more than 200 units of army against their opponents.
According to research by Christina (Cracked 2010), a professional StarCraft player usually needs to
do 300 actions per minute in the game, which is an average of five actions or commands per second.
The sounds of tapping and mouse clicking from the player’s keyboard never stop for a single second
during the game. Every round of eSports games is very intense and will not allow players to take

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breaks, so to have a clear mind and keep thinking calmly is one of most important requirements for
a professional player.
Price comparisons between professional eSports equipment and traditional sports equipment
Professional eSports equipment, also called ‘Gaming gear’, basically includes mouse, keyboard,
headset, microphone, monitor and computer. As Figure 1.3 (below) shows, a professional gaming
mouse and keyboard will usually cost more than 100 GBP, and a pair of professional basketball
sneakers usually cost more than 100 GBP, too.
Figure 2.1.3: Gaming gear prices on Amazon.co.uk (Amazon 2014)
Figure 2.1.4: Professional basketball sneakers price list on Nike Store UK (Nike 2014)
Moreover, a high performance PC is very necessary for eSports players’ daily training and taking
part in matches. A high performance PC will provide smoother game running and keep the PC error-
free with lag protection to help players keep steady performance during games. The Dell Computer
Company provides a type of computer especially for gaming which is called ‘Alienware’. It is one of
the most famous gaming computers in production in the world. Brad Whatmough, Head of
Consumer Marketing in Dell said ‘Alienware presents gaming enthusiasts with high-quality, high-

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performance products. Intel and Dell Gaming have always worked closely to provide gamers with
the highest-performing equipment possible’ (Anonymous 2008). However, these high performance
PCs are not cheap at all; Figure 1.5 below shows a normal gaming PC will cost more than 1000 GBP.
From the financial perspective, this basic equipment is regarded as entrance tickets, and the
requirements and conditions to be an eSports player are quite high.
Figure 2.1.5: Alienware Aurora PC price list (Alienware 2014)
In this case, although eSports players spend large amounts of time and money on their training and
matches, just as traditional sports players do, eSports players are not awarded with the same level
of respect as traditional sports players. Hence, to consider the cost of a player’s training and being
a professional eSports player is not an easy and cheap job for common people.
2.1.3 eSports players’ self-actualization in virtual worlds
In this segment, first of all, the paper is going to present the definition of the dualistic model of
passion, and point out how eSports players usually have different types of passion in their different
career stages. After that, the positive correlation with affect when eSport players play the games
with harmonious passion will be shown. Finally, the self-actualization in eSports players’ virtual
worlds will be pointed out.
The Dualistic Model of Passion, created by Vallerand et al. (2005), shows there are two kinds of
passion that can motivate a behaviour: one is harmonious passion and the other is obsessive passion.
Harmonious passion is when people could engage in an activity by their own will and with pleasure,

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and the engagement does not conflict with their normal life and other daily activities. In other words,
‘In harmonious passion, the individual controls the passion’ (Stoeber 2011), which means that
people have the ability to control their activity. On the other hand, obsessive passion is when people
engage in the activity frequently, trying to avoid the pressure coming from other life domains or
from their personality. In other words, ‘In Obsessive passion, the passion controls the person’
(Stoeber 2011), which means the favourite activity controls the people, just like an addiction.
Moreover, Stoeber (2011) pointed out ‘The harmonious passion is positively associated with general
positive affect whereas obsessive passion is associated with general negative affect.’ So, which types
of passion does the eSports player usually have? In fact, eSports players usually have different types
of passion in their professional electronic player career path. Before these casual players become
professionals, they are almost addicted to computer games. Obsessive passion makes them forget
everything except playing computer games, and they stay in the virtual world and try to avoid the
pressures coming from their other life. One of the most famous eSports players, ‘Sky’ XiaoFeng Li,
had a very tough childhood. Li was not a good student, and because of his bad school performance,
he was always scolded by his father. When he played ‘Warcraft III’ as a casual player for the first
time, he was attracted by the game, and Li was unbeatable in it. Playing computer games made Li
feel happy, and he increased his self-confidence by beating opponents on-line. Li got more attention
and gained self-esteem by playing ‘Warcraft III’. After Li gained agreement from his father to be a
professional electronic sport player, he adjusted his life style, started training properly, and adjusted
his training and leisure time. In so doing, Li changed his obsessive passion into a harmonious one.
With his harmonious passion for computer games, Li won the championship in the ‘World Cyber
Games’ in 2005 and 2006 (Baike 2014).
Furthermore, the present author could illustrate with an example from his own experience to help
in understanding the harmonious and obsessive passions. I had been playing a first person shooting
game, ‘Counter-Strike’ for more than five years. I was very seriously addicted to the game in 2011,
and I admitted to myself that I was playing the game with obsessive passion. I had been playing the
game all day every day except for eating and sleeping, which caused me to receive bad results from
some of my undergraduate courses. After that, I started to adjust my game playing time, and started

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to get involved in other activities in my life. This experience demonstrated obsessive passion, which
provided more negative affect than would harmonious passion.
The examples above show professional eSports players usually start by being addicted to the games
with obsessive passion, which then turns into harmonious passion when players start to face it as a
proper profession. However, players always have their self-actualization whether they are in the
zone with harmonious passion or obsessive passion. Rosenbaum (2013) applied Maslow's hierarchy
of needs to playing computer games, and pointed out that social needs, esteem needs and self-
actualization are the three levels which computer games players are looking for and to achieve and
satisfy. Rosenbaum (2013) also mentioned ‘There is nothing beats that satisfaction when you feel
being a hero, or beat your opponents.’ So generally speaking, for both professional and casual
computer games players, winning the game or reaching the highest score will help them to gain
satisfaction, increase their self-confidence, gain attention with esteem from other players, and
complete their self-actualization.

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2.2 General Overview of the Two Most Famous eSports
Games and the Effectiveness of China
Starting in 2010, two of the most popular Multiplayer Online Battle-Arena (MOBA) games, -League
of Legends (LOL) and DotA 2, have been published by two American games development companies,
Riot and Valve, respectively. Nowadays, League of Legends and DotA 2 have almost equally split the
world population of eSports game enthusiasts.
League of Legends (LOL)
League of Legends is a fast-paced, competitive online game that blends the speed and intensity of
an RTS with RPG elements. Two teams of champions battle head-to-head across multiple battlefields
(League of legends 2014). In 2013, Riot’s total revenues from running League of Legends reached
624 million USD (Game spot 2014), to reach the second place for free-to-play games. According to
Riot (2014), 67 million players had been played in January 2014, and over 7.5 million playing at the
same time during each day’s peak play time. The chart below (Chart 2.2.1) shows that there were
4.81 million Chinese playing League of Legends daily, which means that almost half of the total
playing population came from China.
In order to return customers’ support and love of the game, and attract more customers in the
future, the Riot games development company has been hosting their own League of Legends
championship tournament for three years with big prizes. In 2011, the first year of the LOL
championship tournament, 100,000 USD were provided for the total prize pool (Esportsearnings,
2012). After that, in 2012 and 2013, the LOL world championship seasons two and three provided
two million USD for the total prize pool each. These were the two biggest professional LOL world
tournaments so far with the highest rewards, which was a remarkable milestone in the eSports
market (Polygon, 2013).
Although LOL was a competitive on-line game produced by an American games development
company, America did not win a single championship in these three years. The first season

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championship was taken by a European team, and then Chinese and South Korean teams won the
championships in 2012 and 2013 respectively, both going home with the one million USD grand final
prize (Esportsearnings, 2012). Particularly worth mentioning is that, starting with the second season
of the world championships, Chinese and South Korean teams never went down to third place.
Hence, it is not hard to tell that League of Legends is a very popular MOBA game in Asia, and judging
from the huge daily number of Chinese playing LOL, it has a great potential for market investment
in China, and Chinese electronic sports will have good prospects.
Chart 2.2.1: Chinese games customers’ daily choices in 2013 (Enfodesk, 2013)
DotA 2
DotA 2 was another popular competitive MOBA game in the world. The game mode is very similar
to League of Legends. Players pick from a pool of over a hundred heroes, forming two teams of five
players to defend their respective bases (Valve software, 2014). DotA 2 is the biggest competitor for
LOL; according to the data from Steam (2014), in July 2014, the average number of players was
around 5.3 million per day, and the population could reach 8.7 million at the daily peak time
(Steamcharts, 2014), which is 1 million more than LOL. The Figure 2.2.2 below shows that the
population of DotA 2 is growing continuously.
Furthermore, DotA 2 also has its own world championship tournament, which it has been holding
for four years already. The prize money for the champions has been increase from 2012 to 2014. In
481.63
173.08
130.73
95.16
78.4
45.21
36.55
0 100 200 300 400 500 600
LOL
CROSS FIRE
D&D
DREAM TRAVEL
WOW
QQ DANCING
QQ RACING
Users (millions)
Games
2013 Chinese game daily active users

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2011 and 2012, the prize money for the first place champions was 1 million USD each, which was
equal to the grand final prize of LOL in 2012 and 2013. After that, the grand final prize for the
champions in 2013 increased to 1.4 million USD, which made professional players happy around the
world (Esports earnings, 2014). After 2013, Valve set the new highest record for an electronic sports
final prize, which was five million USD for first place who won the 2014 international DotA 2
tournament champion (DotA2 2014), and the total prize pool for the fourth International
championships was up to 10 million USD, which is 10 times bigger than the LOL world championship
Season three. One of the most authoritative British gaming websites, UK.ign, has been reporting this
news, and pointed out that ‘The newest milestone has unlocked "victory prediction taunts"’ (UK.ign
2014), showing how big the award was, especially for a computer games competition, and even
went a little irrational and ridiculous. Gaming website, joystiq.com (2014), used ‘counts out fingers’
to express how surprised world DotA 2 enthusiasts were, and pointed out again that ‘The DotA 2
International 2014 will be the record-holder for largest prize pool in eSports history’ (Joystiq, 2014).
Figure 2.2.2 DotA 2 population growth trend from 2012 to 2014
 Commonalities
There is a similarity between the LOL world cup and the DotA 2 championships. As the paragraph
regarding LOL mentioned before, the Chinese team won the championships in 2012, and gained
second place in 2013 (Esports earnings, 2012), which could prove that the Chinese professional LOL
players have top level standing in this game. On the other hand, in the international championships
of DotA 2, the Chinese team won two championships out of four, which was in 2012 and 2014. In
2014, especially, two of the Chinese team were ‘fighting’ in the grand final match against each other,

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and went home together with 6.5 million USD in prize money (DotA 2 2014). The tournament results
show that there were four Chinese teams participating in this competition and took 79% of the total
prizes away (Esports earnings, 2012). This, once again, proved the strength of the Chinese team in
this game. Hence, it is not hard to find out that Chinese players are quite good at playing electronic
sport, especially MOBA games, such as LOL and DotA 2, and also means that electronic sports have
a great welcome and popular support from the large number of enthusiasts in China with very
promising investment future.
Moreover, LOL and DotA 2 both were published by different Chinese games agents to avoid the
expenditure for obtaining the limitation permits by the Chinese government. Riot released and
distributed LOL in China, and named the Chinese company Tencent as the game agent in 2009
(Pehub 2009). Tencent used its geographical advantage, which provides more than 400 million
stable customers in China, and its high profile brand name effect to help Riot obtain approximately
70 million customers in 2014 and occupied most of the Chinese computer games market (Pehub
2009). Just as Riot did, Valve also found its Chinese game agent, ‘PERFECT LTD’, to publish DotA 2 in
the Chinese region in July of 2013 (Gosugamers 2013). Before that, because Valve did not have
access permits for doing business in China, it set up a data transfer station and game servers based
in Singapore for Asian DotA 2 game operation. However, there were continually negative reviews
from Chinese players about losing connections and long internet delay problems (Steam community
2013). At the same time, DotA 2 was losing its popularity in comparison with LOL; the data showed
that DotA 2 only gained 50,000 players as an average daily population in China before Valve
launched the new DotA 2 Chinese client with PERFECT (Gosugamers 2013). After that, Valve realised
how serious and urgent it was to cooperate with a local Chinese game agent company in running
DotA 2, and the popularity of DotA 2 has started to return with a rapid growth rate (Gosugamers
2013). The case above shows there is an unavoidable barrier from the Chinese government for
operating a new games business in China, but once the company has overcome the barrier by
cooperating with a Chinese games agent, the future of investment is bright and impressive.

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There is another particular point worth mentioning, LOL and DotA 2 were both making profits by
using micro transactions and a free-to-play business strategy. In LOL and DotA 2, customers can
enter both of the games without any payment access. And customers can purchase cosmetic items
or skins with real-world currency which would make their characters look different and more
outstanding in the game (Kdramastars 2014). However, the slight differences between LOL and DotA
2 are those players in DotA 2 who have a chance to have those items randomly for free, but the rare
items are very hard to drop; after that, they have the right to sell these items in a virtual ‘market’
and trade them back for real-world currency. Although during the transaction, Valve will take 10%
transaction fee, it provides almost 100% of trading free to the customers, and that are popular with
customers.
In contrast, LOL did not provide a similar kind of market trading service. There is only one way to
purchase such items and no way to return them. All the money finally goes into Riot’s pocket. At the
end, LOL ended 2013 with total revenues of 624 million USD, and all the money came from micro
transactions (Gamespot 2014). Unfortunately, Valve only generated around 80 million USD in micro
transaction revenues in 2013, which is 500 million USD less than LOL, and with a ranked place of
13th in the virtual item selling games market (Kdramastars 2014). Although DotA 2 was not doing as
well as LOL in terms of revenue, Valve were still willing to take out 10 million USD, which is 12.5%
of their total revenue (DotA 2 2014), as the International championship tournament prize money
for the professional players, as an appreciation to their customers.
So, in the short term profitability perspective, Riot’s LOL has been a great investment and gaining
an impressive profit. However, if one looks at the long-term point of view, Valve has been taking
care of its customers, buying popularity and winning popular support. Valve is trying to play a long
game and augment their income gradually. The Data analyst Dreunen (2014) pointed out that DotA
2 revenues were triple the monthly growth of 2013, so Dreunen (2014) predicts that due to the
momentum behind the MOBA category, DotA 2 will double its revenue at least in 2014, which shows
that there will be a great future for DotA 2 (Venturebeat 2014).

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2.3 Case study – The Most Successful South Korean
Game in the Chinese eSports Market – CrossFire
Cross fire is a first person view shooting game. The game was produced by a South Korean games
company, Smile Gate (Smilegate 2014). It has been published by different companies in the world,
for instance Z8Games released CrossFire in the USA, Brazil and Latin America (Z8games, 2014), and
Tencent had released CrossFire in China from 2008, which was one of the earliest countries to launch
the game (Tencent, 2014). Starting from 2008, CrossFire is becoming the most popular first-person
shooting game in China. The games news by Duowan (2011) reported that there were more than
three million on-line players playing CrossFire at peak time per day in 2011, and it also pointed out
this was a new record for on-line games. After 2011, the number playing CrossFire was still
increasing continuously; in August of 2012 the number reached four million at peak time per day
(News.4399, 2012). The facts proved CrossFire definitely was the most popular FPS game in China
from 2010 to 2012. Unfortunately, because Tencent published League of Legends on the Chinese
market in 2012, there was a large number of players who changed their game choice to LOL, and as
Figure 2.2.1 ‘Chinese games customers’ daily choices in 2013’ shows (Enfodesk, 2013), there were
more than 4.8 million people playing LOL, but only 1.7 million people were still playing CF; the
number of players of CF had dropped by 65% from 2012 because League of Legends took much of
the popularity from CrossFire. Although the popularity of CrossFire had a downturn, it still did
successful business. According to the finance magazine Forbes (2014), ‘Cross Fire has become the
most profitable free to play game in the world’, and ‘The free-to-play shooter brings in 957 million
USD in annual revenue from its micro transactions, beating out presumed number one, League of
Legends.’ Figure 2.3.1 shows the top 10 online games, based on free-to-play earnings (Forbes 2014).
Figure 2.3.1 the top 10 online games, based on free-to-play earnings (Forbes 2014)

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Just like DotA 2 and LOL, CrossFire also has been holding its own tournaments for six years already.
Started in September of 2008, Tencent began to provide ‘CF hundreds of cities championships’ every
year in China (Gamesqq 2008). Although Tencent have made a massive profit by running CrossFire
in China, Tencent only provides a few prizes for the ‘CF hundreds of cities championships’
tournament. Figure 2.2.5 shows the list of prizes in the ‘CF hundreds of city championships 2014’,
and the winner of the championships will only get 50,000 RMB, which is worth about 8000 USD;
compared with the prizes from DotA 2 and LOL, this is much less. However, the fact of lower prize
money did not affect the popularity of Chinese CrossFire enthusiasts. The total number of teams
participating in the tournaments was over 15,000, and the estimated number of players was more
than 150,000. The ‘CF hundreds of cities championships’ tournament broke a record to become the
most popular contest in electronic games competition (Baike 2014).
Figure 2.3.2 list of Prize pool – ‘CF hundreds of cities championships 2014’
Moreover, CrossFire carries out the events and tournaments by itself, but it is also looking for some
comprehensive eSports games organizations to hold and contract events instead of itself, such as
one of the most famous and authoritative organizations, the World Cyber Games (WCG). Started in
2001, WCG has been holding a large global electronic sports tournament every year, which contains
more than 170 competitors from 17 different countries to play the most competitive games, which
include LOL, DotA 2, Counter-Strike and CrossFire (Pcgames 2013). The record shows that in 2009
the cumulative audiences were above 45,000 in the WCG, and with a live webcast with total viewers
of 6.5 million, which was a historic achievement for a world eSports tournament (Chanye 2011). The
generation most affected by the WCG was between the ages of 15 and 25, which accounts for 65%
of the total of eSports fans, and another 35% of the total was between the ages of 20 and 25 (Chanye
2011). The data above reflect that the younger generation, which is full of games enthusiasts, is the

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most affected by the game. It is a great strategy for games companies to cooperate with eSports
games organizations for demonstrating their games, and to sell their products to young customers.
Apparently, CrossFire has made a successful investment in the Chinese market, but why was it so
popular and what made it so popular? After the wide research for the present study, it appears that
there are four main reasons to explain why CrossFire had great popularity and did successful
business, especially in China. These reasons are discussed below.
1) Easy to start and simple to play
Forbes (2014) describes CrossFire as a game which is ‘far easier to pick up and play than even its
own in-house competition, League of Legends.’ The only one requirement for starting to play
CrossFire is to create an account and a password; then the CF official website will pop up a link for
the game download. Then, the customers are ready to play this game. Moreover, CF is a low skill
level shooting game, and is easy to pick up, even for children (Gameguyz 2014). Forbes (2014) also
judged this game to be ‘fairly close to a clone of Counter-Strike, arguably the best competitive FPS
ever made’, but largely reduced the difficulty of the game. So the first impression of this game for
the present author was ‘easy to kill opponents.’ In section 2.1, computer players’ self-actualization
was discussed, and Rosenbaum’s (2013) opinion about what a game could bring to you was referred
to, i.e. that ‘There is nothing beats that satisfaction when you feel being a hero, or beat your
opponents.’ Hence, CrossFire completely became a simple game with popular appeal, and the low
skill level requirement of CrossFire actually made more casual players like this game.
2) Large scale of Micro transactions
CrossFire provides an in-game store, which sells the most important items, such as weapons,
grenades, and bullet-proof and anti-smoke helmets. These virtual items are not cheap; customers
need to purchase them with real-world currency (Gameguyz 2014). The virtual items which can be
purchased with real-world money are much better and more powerful than the default items.
Gameguyz (2014) also report ‘The guns which players purchased could even have no recoil force.
No matter how skilled you are, you may lose to a player with a powerful gun.’ Hence, players who

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have these powerful and expensive items will have the chance to control the game, for instance
using powerful weapons to kill more opponents and cover up a player’s low level skills. So, more
and more players are willing to pay money for items. These items are quite expensive to purchase;
Figure 2.3.3 (mall.Z8games, 2014) shows one of the most expensive items in the game, which costs
28.50 GBP for 90 days (28,500 in game Z-points are equal to 28.50 GBP).
Figure 2.3.3 Price list in Cross fire (mall.Z8games, 2014)
Moreover, Forbes (2014) also pointed out ‘It seems if a player spends a decent amount, they’ll have
an advantage over friends and strangers alike’, which once again proved and demonstrated that
computer players’ self-actualization (Rosenbaum, 2013) has a unique and important position in a
successful computer games market strategy. Virtual items purchase with micro transactions was the
main component of CrossFire’s massive revenues.
3) Lower average computer performance and internet speed in China
According to report by Enfodesk (2013), 71.84% of customers choose to play computer games at
home, and 15.66% of customers play computer games in internet cafés. 40% are students and 6%
of customers are unemployed. Even more serious is the fact that 60% of customers’ monthly income
was below 300 GBP. On Dell’s online shop website (Dell 2014), in general the minimum price for a
low-performance gaming desktop is almost 600 GBP, as shown in Figure 2.2.4 below. To consider
most Chinese customers’ financial condition, there is only a remote possibility of more than 50% of
Chinese customers having a medium level performance computer.
Moreover, according to the data about general computer performance in China’s internet cafés by
Wbzol (2011), 45.3% of internet cafés provided computers which only have a 4 GB memory disk,
and 34.5% of internet café computers had less than a 2 GB memory disk. At the same time, there
were only 36.3% of internet cafés which had computers with 1 GB graphic card memory. Usually, a

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medium performance computer requires at least 2 GB of memory, and gamers will want to begin
with 2 GB memory to be ready for upcoming games, and at least 1 GB of graphics card memory
should be recommended (Ehow, 2014). So, approximately 40% of computers in China’s internet
cafés are below the minimum requirements for a gaming computer.
Figure 2.3.4: The lowest price of a performance gaming desktop (Dell 2014)
Although the average computer’s performance in China was not good, CrossFire is not a game which
has a high performance requirement. The game does not require a high speed and stable internet
connection to play (Forbes 2014), and also ‘Compared with other high-quality FPS like Call of Duty,
Cross Fire can run smoothly on basically anything.’ (Gameguyz 2014), and the report also pointed
out that, because of the special Chinese environment, CrossFire successfully meets most Chinese
players’ demands, simple and violent.
4) Free To Play (F2P)
Free to play is a ‘freemium’ product which based on a ‘free and premium’ business model. In the
freemium business model, customers usually get a core product for free, but have to purchase the
further premium products for more functionality (Freemium, 2014). The freemium strategy is very
suitable for operating in the Chinese electronic games market, and it was also mentioned in Section
2.2. LOL and DotA 2 both have this strategy for the Chinese customers. A Chinese economist, YongDo
He (2012), mentioned that ‘Chinese customers always have a small “calculator” inside of their mind,
always trying to figure out the best deal for themselves and save as much money as they can.’ So,
when a product comes onto the market with a big ‘Free’ sign, that is the ‘beneficial’ product which
Chinese are all looking for, just like the free-to-play CrossFire.

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However, does the freemium product really provide the maximum benefits to the Chinese
customers? Harvard business review (2014) had also asked a similar question: ‘Do customers fully
understand the premium offer?’ One of the most successful freemium business examples is Skype
(Freemium, 2014). Skype provides free internet voice calls between computers and smart phones,
but Skype also provides chargeable products such as international calls, calls to landlines, and
cheaper hot-line service calls. The Harvard business review (2014) pointed out that if a digital
product has more than 20 features, then the product could use a freemium strategy to provide five
of the 20 for free, and the other 15 features for payment. Hence, free-to-play is a strategy which
could provide high customer attraction, then make profits by selling additional premium features.
Because of CrossFire’s free-to-play strategy, Tencent was successful in the Chinese computer games
market, using the freemium business model.

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2.4 Case study – South Korean Electronic Sports from
Four Dimensions
The most popular competitive electronic game in South Korea is StarCraft II. The organisation and
marketing framework of StarCraft II is very mature and stable now; it has its own league matches,
television channels and large amounts of sponsors, and South Korea is becoming ‘the Kingdom of
the game’ (Esports.17173 2011). South Korea is becoming a great example for eSports industry
development; the total South Korean games market was worth 9.15 billion USD in 2013 (Techinasia
2013). This section will illustrate several examples of successful development using PEST analysis
from four dimensions: Political, Economic, Social and Technological; and the results will be used for
reference to Chinese electronic sports development.
Political
South Korea is a country which pays much attention to the media and entertainment industries, and
the causes of this began with the 1997 Asian financial crisis (Dick 1998). Starting in July of 1997,
Asia's rapid economic development had been badly hit by the Asian financial crisis and the country
faced its greatest economic depression. This caused the South Korean government to realise the
negative facts of its focus on the development of heavy industry. After 1997, South Korea started to
seek and develop a batch of new industries, and aimed to revitalize the national economy. The
amount of tertiary industries, such as film entertainment, digital electronic devices and electronic
games, all began to have much government support and started to develop rapidly (esports.17173
2011).
The first great achievement which South Korea had was starting an electronic sports organisation.
After 1998, the South Korean government started creating an official electronic sports organisation,
the Korean eSports Association (KeSPA), a government-funded organisation which managed all the
regulations, matches, events and the eSports market (Dailydot 2014). Then, because of the depth
of the Asian financial crisis, citizens were looking for some new and cheaper daily entertainment to
enrich their lives, so they went to internet cafés and played computer games, which gradually

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became the most popular entertainment for young people (Esports.17173 2011). Hence, the second
great achievement of the South Korean government was to complete national network coverage.
After that, an RTS game, ‘StarCraft I: Brood War,’ got the attention of the world, and South Korea in
1998, and then StarCraft I became the national electronic game in South Korea. KeSPA started to
manage the advertising for the game and to create television programmes about full-scale
tournaments; and all the business which KeSPA did was supported by the South Korean government
(Salient 2014). So, the third great achievement by the South Korean government was supporting the
development of games in every possible way.
Furthermore, back to 2012, the South Korean government established a council which aimed to
build combined development between the on-line gaming industry and the electronic sports
industry. The council organized the government, eSports groups, the gaming industry, the media,
and academia to participate in this activity, and is looking forward to bringing the national eSports
culture to the next level (Korea 2012). After that, the South Korean government even established
legislation for helping the national eSports to lay a foundation between eSports and the games
industry (Korea 2012). All the examples above could prove South Korea made a huge contribution
to the development of electronic sports by using political support from government.
Economic
South Korea ended 2013 with 23,600 USD GDP per capita and a 2.0% GDP growth rate, and it is
currently the world's 12th largest economy (Forbes 2013). The electronic sports industry is one of
the pillar industries in the national economy; the South Korean eSports industry provided 9.25
billion USD of total sales and 2.6 billion USD of exports in 2013 (Advanced technology Korea 2013).
Research into Korean games in 2013 shows 69.9% of revenue came from on-line games, which were
worth approximately 6.7 billion USD, and the proportion of on-line games had been increasing every
year (Kocca 2013). The report also pointed out the on-line games had a very stable foundation and
popularity in the domestic market for future years.

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In addition, South Korea had exported domestic games overseas which were worth 2.6 billion USD
with 11% growth rate from the previous year, and the import of games was considerably lower and
steady. China was the largest games export market for South Korea in 2012, accounting for 39%,
and the second place was Japan with 26.7% of total game exports from South Korea (Kocca 2013).
China and Japan took more than 55% of total South Korean games exports. The above data show
that South Korea is one of the strongest countries in the production of domestic games, and once
again proved the electronic sports industry is one of the pillar industries in South Korea.
Social
South Korean television programmes contribute much to South Korean electronic sports. Once
again, because of the negative facts of the Asian financial crisis, many traditional entertainment
television programmes were facing shortages of funds and were even closing down. Game-Q
channel was the pioneer in South Korean electronic sports television programmes. Game-Q found
that the cost of producing computer games on TV programmes was very low compared with
traditional entertainment programmes, such as dancing and singing performances (Esports.17173
2011). TV programmes for computer games met the demand of the ordinary people for low cost
consumption entertainment, and at the same time, it provided cheap material for mainstream
media television programmes (Esports.17173 2011). Game-Q and other eSports TV helped and
brought electronic sports to the next level which was to make eSports more close to popular culture
and mass entertainment.
After that, several South Korean TV programmes have also been started to cooperate with the
Korean eSports Association to organise their own StarCraft tournaments. OnGameNet TV channel
(Ongamenet 2014) started its own competition league, ‘OnGameNet Star League’ with a full
schedule of three seasons a year. In 2009, OnGameNet Star League Grand Final took 56.79% of the
national television ratings, which means half of the population in South Korea were watching the
tournament that day (Esports.17173 2011). Social media gave a huge push to the development of
South Korean eSports and also made great profits with it. Yang (2010) concluded that media is one
of the cores in the eSports industry. Media helped the eSports industry to increase their popularity

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with the publicity. Star players of eSports could create their own brand value through media, just as
traditional sports stars do. Tournaments, virtual game experiences and excellent game performance
by professional players all provide mental enjoyment to the audiences, but this enjoyment is only
an intangible asset which was produced by the eSports industry, and transformed into tangible
assets by the media.
In 2012, data from the ‘White Paper South Korean Games’ (Kocca 2012) showed that there were
more than 18 million people who played computer games in South Korea, and the total population
of South Korea was about 50.004 million (World population statistics 2013), which means 36% of
Koreans played computer games in their daily lives. The data (Kocca 2012) also recorded that 36%
of people said the reason for gaming is ‘because it is fun’, and 30% of people chose it ‘to ease stress’,
and of the group of 36% who chose ‘because it is fun’, more than 65% were between 9 and 14 years
old, which means different generations have different attitudes to playing games. The young
generation cares more about whether the game is fun for them more than whether this game will
help them to relax more. Moreover, the data provide the games genres which will lead the games
market. 27% chose Role gaming (MOBA was included), 15% FPS games, and surprisingly the most
popular genre game, RTS, at the beginning of 2000, had dropped dramatically to 6.3% in 2012, which
means RTS games had been losing popularity in South Korea, including the most famous RTS game,
StarCraft II. So, will StarCraft II keep hold of its popularity in the future? How long can a famous
game survive in a competitive market? This has become a very serious question for the Korean
eSports Association to worry about; and Chinese eSports should learn a lesson from South Korea,
too.
Technological
In 2011, South Korea completed the whole national high-speed network coverage, which included
3G and 4G mobile internet, and full free Wi-Fi. Network coverage in South Korea is much higher
than the average coverage (54.3%) of other countries (Chinaz 2012). Starting in July of 2013, 98% of
households in South Korea had already connected to the internet, and there were already 40 million
people using the internet, which accounted for 80% of the total population. In the previous ten

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years, the South Korean rate of internet usage had increased from 65.5% to 82.1% (Chinanews 2013).
Moreover, the South Korean government had allocated 3 billion USD to its target of equipping all
families with a cable connection and 10 Gbps broadband expansion for commercialization by 2020
(Cnii 2011). South Korea is not only ahead of other countries in network technology, the computer
industry also made 3.5 billion USD of profits in 2011, and revenues were forecast to increase to 4.3
billion USD in 2015 with an annual growth rate of 5% (OSEC 2011). The fast and free internet and
high computer penetration rate in South Korea helps the eSports industry to create a solid
foundation and keep developing in a stable environment.
Furthermore, social media have also been improving their technology for eSports. In Section 2.1, it
was mentioned that a professional player usually does five actions and commands per second during
the game, so the professional eSports players’ keyboard operating speed is very fast (MoletrapSC2
2012), which is highly visual attractive and artistic. The first gaming TV channel in South Korea,
Game-Q, provided special technology for video processing. In 1998, Game-Q was the first TV
channel that could change screen randomly between the players’ first-person view and the
commentator’s view during a live event broadcast, and this new technology increased the visual
impact sharply (Esports.17173 2011).

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2.5 Success Factors for Developing the eSports Business
in China
Drawing on the previous sections (i.e. the case study of one of the successful games in China, the
South Korean electronic sports environment, overviews of two famous electronic sports games in
China and their characteristics), the key success factors for developing a successful electronic sports
industry in China with necessary external and internal environments have been selected and are
given below.
External
 To develop the electronic sports industry at the appropriate time. (Section 2.4)
After 1997, South Korea aimed to revitalize the national economy with tertiary industries. The
electronic sports industry was one of the tertiary industries to receive national attention.
 An official eSports organisation was established with government support. (Section 2.4)
 To strengthen the foundation of national eSports industry by establishing the relevant
legislation. (Section 2.4)
 A strong atmosphere of gaming development will lend the eSports industry a helping hand.
(Section 2.2)
 Social and broadcasting media are the core of electronic sports for advertising and publicity.
(Section 2.4)
 A high computer usage rate in a country will help games companies to achieve more customers.
(Section 2.4)
 Wide internet network coverage in a country will help to propagate the culture of eSports and
also help the eSports industry develop faster. (Section 2.4)
Internal
 With a large group of enthusiasts for competitive games in China, competitive games have a
large potential investment in the Chinese games market. (Section 2.2)

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 Foreign games companies need to cooperate with Chinese games companies to publish new
games in China, to avoid limitations on permits. (Section 2.2)
 Micro transactions and free-to-play are beneficial and popular strategies for Chinese customers.
(Section 2.3)
 Games companies should provide more events and tournaments to attract more customers and
sell its product. (Section 2.2)
 Games with simple operation which provide high self-accomplishment are very welcome in
China. (Section 2.3)
 The young generation is more likely to accept new games. (Section 2.3)
 Comprehensive eSports games organizations could help games companies to advertise their
games. (Section 2.3)
 Games should only require low computer performance, to match up with the average level of
computer in China. (Section 2.3)
In Chapter Five, these success factors will be used to compare with the current Chinese electronic
sports industry situation, and evaluate the prospects of the game Counter-Strike: Global Offensive
in the Chinese games market. After that, in Chapter Six, using the comparisons between success
factors and the current Chinese eSports conditions, specific advice and recommendations will be
provided to illustrate suggestions for development to the Chinese eSports industry, and to help the
Valve Software Company to export CSGO into the Chinese games market.

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CHAPTER THREE: Research and
Methodology
3.1 Introduction
Chapter three is going to study the research ‘onion’ (Saunders 2009), to understand what each
different layer contains. After that the research approaches which were chosen will be described,
and the appropriate strategies which were designed, and the major implementation for data
collection will be explained. Then, the importance of ethical considerations during the research will
be emphasised and several protections which are going to be pointed out.
3.2 Research Approaches
There are two main methods of reasoning, the inductive approach and the deductive approach. The
deductive approach involves the development of a theory that is subjected to a rigorous test
(Saunders 2009). Deductive reasoning is also called the ‘top-down’ approach; the first step is to
determine a theory about the topic of interest, then according to the theory to deduce and narrow
down into many particular and specific hypotheses, and then these hypotheses should be tested by
collecting observations, or by questionnaire or interviews. After that these hypotheses are used with
the data provided to confirm the theory (Trochim 2007). The major steps of the deductive approach
include theory, hypothesis, observation and confirmation (Trochim 2007). During the deductive
approach, the collection of quantitative data will help hypothesis testing and theory conformation
(Robson 2002). Saunders et al. (2009) also mentioned that there are three main characteristic of the
deductive approach, principle of scientific rigour, operationalization and generalisation, and that
these characteristic all point out the significance of quantitative measurement and samples of
sufficient numerical size. To sum up, the deductive approach is a research approach which aims to
test the theory by using hypotheses with specific data provided.

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Inductive reasoning is to deduce in the opposite direction. The major elements of the inductive
approach include observation, pattern, tentative hypothesis and theory (Trochim 2007). The
approach is to start with wide samples and phenomena, and minimise them to specific data and
observations, then explore them to discover patterns and regularities. This information is used to
reason out several tentative hypotheses, and, at the end, theories with testimony and conclusions
come out (Trochim 2007). Moreover, the inductive approach is more generally associated with
qualitative research, and researchers who do qualitative research usually determine a topic first and
start to discover it, rather than lay their aims on a pre-determined hypothesis (Saunders 2009).
Further, Saunders et al. (2009) point out that it is possible to combine inductive and deductive
research. Creswell (2002) formulated practical criteria for the combination of research approaches,
the emphasis and nature of the research topic being the key. Creswell (2002) concluded that if the
topic does have plentiful literature and the theoretical framework could be determined with a
suitable and reasonable hypothesis, then in that case a deductive approach should be used; if the
topic is rare and new with less existing literature, it would be appropriate to utilise an inductive
approach. After that, to return to the topic of the dissertation, electronic sports is a newly developed
industry and there is little existing literature, and its theoretical framework is immature. First of all,
an inductive approach will be used, starting with specific observations of the phenomena in the
electronic sports industry, then moving on to detecting patterns of industry and the impact of
eSports on society. After that, hypotheses will be formulated, leading to the development of
conclusions with criteria for developing a successful eSports business in China. After following the
inductive approach, a deductive approach will be employed by referring to the previous conclusions,
putting these criteria into a new hypothesis with observations, and ascertaining whether it can be
confirmed that the game, ‘Counter-Strike: Global Offensive’, will be a potential investment in the
Chinese electronic sports market. This will lead to the appropriate recommendations. Hence, it was
decided to use a combined research approach.

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3.3 Research Strategies
Research strategies are distributed in the middle of the research ‘onion’ (Saunders 2009), and
include experiment, survey, case study, action research, grounded theory, ethnography, and
archival research. Some of strategies are more applicable to the deductive approach, others to the
inductive approach, but each strategy should not be treated as being mutually exclusive. Saunders
et al. (2009) pointed out that there is no such thing as a research strategy which is better or more
complete than others; the best research strategy is to complete the particular research questions
and reflect on the objectives. In the present research, three of the most suitable research strategies
were picked for the topic, as follows.
 Archival research
Archival research is a strategy which quotes and takes examples using administrative records and
documents as the principal source of data (Saunders 2009). Saunders et al. (2009) emphasise that
because these data were collected for different purposes and by different organisations, all research
that contains data and records from administration and organisations belongs to secondary data
analysis. However, there are some risks which will mislead people’s research orientations and
relative objectives. Because these data and records would have been collected for different
purposes, there might be a chance that they do not contain the precise information and results to
answer the research questions and meet the objectives; a further problem could be limitations in
accessing these data (Saunders 2009). This is the biggest disadvantage of the archival research
strategy.
The reason why the archival research strategy was chosen as a priority is because the research topic
involves the entire electronic sports industry market. It is very necessary to collect widely the
relevant data and records from the market and industry, such as the profile of China, the distribution
of culture, online games user behaviour, data on the state of the internet network, and so on.
Saunders et al. (2009:150) mentioned that ‘Archival research is part of the reality being studied
rather than having been collected originally as data for research purposes.’ This is the principle of
using archival research, and therefore in the present research large amounts of the existing data

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about the electronic sports industry and the market situation are collected and are used for
extensive study and analysis according to this principle.
 Case study
The case study is a research strategy ‘for doing research which involves an empirical investigation
of a particular contemporary phenomenon within its real life context using multiple sources of
evidence’ (Robson 2002). Case studies will help in gaining a rich understanding of the context of the
research and the processes being enacted (Morris and Wood 1991). To consider the topic of the
present study, the context of the research needs to be fully understood. For instance, to use the
case study research strategy could help in prompting questions such as ‘why’ electronic sports has
been developing rapidly, ‘why’ some games have been running the business successfully, and ‘how’
did they do it.
Moreover, according to the four case study strategies based upon two discrete dimensions by Yin
(2003), which are single case versus multiple case, and holistic case versus embedded case. The
difference between single case and multiple case depends on whether the case is particular or has
consequences afterwards. Single case focuses on a typical case which could provide a chance to
observe and analyse a phenomenon that has rarely been discussed before; and multiple cases have
information links and consequences between several different cases. Yin (2003) emphasises that to
use a single case study, it is necessary to have a strong justification, otherwise it may not provide
enough information for the research, so in this case, multiple case studies may be preferable to a
single case study (Yin 2003). The second dimension, holistic v. embedded cases focuses on the unit
of analysis. Holistic cases involve the analysis as a perfective aspect, such as one whole organisation,
and if the research involves being inside the organisation, such as in some departments or groups
in the organisation, an embedded case study should be chosen. In the present research, the case
study strategy employed was multiple case. Although every case which appears in the dissertation
is unique, such as the South Korean electronic sports industry and the most famous eSports games
in China, there are some links between them. A single case study could not provide full information
and research context in this case.

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 Survey
Saunders et al. (2009) explained that a survey research strategy is often used by business and
management research, and to collect a large amount of data from quantitative research with a
population, and the strategy is usually associated with the deductive approach. The main research
method to use the survey strategy is the questionnaire, whose data can be standardised, allowing
easy comparison. Moreover, people usually think survey strategy is quite authoritative and both
comparatively easy to explain and to understand, because it often appears in newspapers and
internet news. However, due to the difficulty and limitations of the present research topic, using
the survey strategy to collect and measure national data would be very complex and difficult, and
so, consequently, the information is collected using survey-based secondary data.
3.4 Data Collection
Saunders et al. (2009) mentioned that secondary data basically include raw data and published
summaries. For some particular types of research project which include a mass of national data or
international comparisons, secondary data is a good strategy for re-analysing data that have already
been collected for some other purpose. The research topic about the electronic sports industry
covers the national situation and data from the national business market, and apparently secondary
data will give support for the research.
In addition, there are many advantages to secondary data, which are summarized by Saunders et al.
(2009). The first one is that using secondary data will help the author to save time and money
especially in collecting the data (Ghauri and Grønhaug 2005). Using secondary data could save time
for the author to consider and re-build theoretical aims and substantive issues (Saunders 2009).
Secondly, secondary data are usually produced by professional organisations, such as government,
and the data which are obtained are probably more accurate than primary data (Stewart and Kamins
1993). After that, secondary data usually have a possibility to hide unforeseen or unexpected new
discoveries, after re-analysing them (Saunders 2009), and this is one of the achievements that is
being worked on in the present research.

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There are two different kinds of data in secondary data, raw data and compiled data. Raw data is
the data that have been provided without processing and analysis; compiled data is collected for
some purpose with summarising. Saunders et al. (2009) summarised three main sub-groups of
secondary data: documentary data, survey-based data and combination multiple source data. The
present research study will involve these three main sub-groups of secondary data, and multiple
source and survey-based data will be the most frequently-used data. The main data in this research
will generally come from national financial reports, industry statistics and reports, citizen surveys by
government, and also some media accounts. To locate these secondary data, Saunders et al. (2009)
suggest establishing the data that are needed and available, then locating the precise data that are
required. Using the ‘published guides to possible secondary data sources’ and ‘selected information
gateways to secondary data on the Internet’ by Saunders et al. (2009), some secondary data, which
were relative to the research topic, were found. Moreover, for this study the Chinese government
service on line was also accessed, and more government surveys and statistical data about ‘China
Internet Development’ (CNNIC 2014) were obtained.
3.5 Ethical Considerations
Fortunately the project is not going to contain any human participants and primary research data.
The secondary data which were collected in this project relate to the national economy, tertiary
industry and the behaviour of internet users. Regarding ethics, especially for the data concerning
internet users’ behaviour, these users are not going to be identifiable through the data in the project
report, and there is no photographic or voice record to be quoted.
Moreover, to protect the data used in the project, they were downloaded and saved in a private
area, on a password-protected computer. It was promised that privacy would be protected and that
no personal information would be revealed. In addition, this project does not touch on racial beliefs
and does not contain any racial differences or discrimination.

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3.6 Summary
To sum up, firstly two different types of research approach were discussed, the inductive and
deductive approaches. Considering that electronic sports is a new and rare research topic, and the
theoretical framework is not fully developed, an inductive approach will be used to deduce the new
theory and conclusions. Then, this inference of theory will be used to create a new hypothesis and,
to verify the theory, existing data will be used. So the research will involve an inductive approach
and a deductive approach one after the other.
Secondly, the three most suitable research strategies for this topic, which are archival research, case
study and survey, were pointed out. Since the research largely involved the entire electronic sports
industry, the economic market and the national internet population, to study and quote data and
information by archival research is the most convenient, time saving and suitable method.
Moreover, case study and survey are both very important for the research, and also should be used.
Thirdly, it was pointed out that the research for this project would concentrate mainly on secondary
data, and according to the opening data resources and the guideline of gateways to secondary data
on the Internet by Saunders et al (2009), many data resources and on-line approach methods were
found. After that, it is necessary to emphasise again the importance of ethical considerations during
the research, that data protection is taken very seriously, and that racial differences and
discrimination are not going to appear in this project.

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CHAPTER FOUR:Data Analysis &
Discussion
4.1 Chinese Electronic Sports Macro Environment
Analysis by PEST
In this section, PEST analysis will be used to analyse the political, economic, social and technological
aspects relating to Chinese electronic sports. PEST analysis can provide a simple framework for the
macro environment analysis, it helps Chinese eSports to spot business opportunities, and it gives
advanced warning of significant threats. PEST analysis will also determine the positive factors for
Chinese electronic sports.
4.1.1 Political
The ‘State Sports General Administration of China’ approved electronic sports, which became the
99th official sport in China in November of 2003, and after that electronic sports were officially
incorporated under the control of The State Sports General Administration of China (CNR, 2004).
According to data from the information centre of State Sports General Administration of China cited
by He (2013), state funding for eSports development added up to approximately 50 million USD
from 2007 to 2010. The state funds were mostly distributed into the construction of event venues,
the hosting of major events, and sponsorship. This shows that the Chinese government has accepted
electronic sport as a real sport with commercial value.
However, to develop electronic sports in China involves numbers of relevant regulatory
administrations, such as the State Sports General Administration of China, the Chinese Cultural
Bureau, the National Radio and TV Bureau and the Ministry of Information Industry. There are many
differences of attitude toward electronic sports development between the various departments. In
particular, the multi-regulatory mechanism of responsibilities is not clear between the State Sports
General Administration and the Chinese Cultural Bureau. Although the State Sports General

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Administration has admitted that electronic sport is one of the official sports in China and has
provided support funding, the Chinese Cultural Bureau noticed that some electronic sports games
contain negative impact factors for teenagers, so the State Council established the ‘Moral
construction for strengthening and improving the minors' ideology’ in 2004 (Ddpy 2010), which set
up barriers for spreading new games in China, and hindered the development of Chinese electronic
sports. After that, the State Council also ordered the National Radio and TV Bureau to stop
producing and broadcasting any programme related to computer games and electronic sports
(Sarft.gov 2011). This is a huge difference from South Korea. Just as mentioned in section of 2.4,
South Korea made exactly the opposite decision about broadcasting electronic sports, the
government giving much support for broadcasting electronic sports. The Media are a major key to
expanding awareness of eSports and changing people's negative attitudes towards them, but the
general media communication channels have been cut by the Chinese government. The media have
to stop spreading news about eSports, which is likely to create a more negative impression among
the people about eSports. The restraining order has been in force for 10 years now and the
government has not changed or improved any regulations about it so far, which has been producing
a large negative affect on the development of Chinese eSports.
Although the State Council of China has established many temporal methods for teenagers’
education protection and limitations on spreading news about electronic sports, there is no
legislation about protecting the rights and interests of electronic sport itself. A monopoly
phenomenon between the electronic sports industry and sponsors is getting more and more serious.
For instance, Tencent was the biggest sponsor for the WECG organisation, and Tencent forced WECG
with a large amount of sponsorship to add their on-line game, ‘QQ dancing’ to the electronic sports
tournament, which received strong opposition from viewers’ (Gamersky 2014).
Furthermore, according to research by He (2013), there are two types of organisation in China. One
is established by sports associations in every province. Each sports association has the right to create
gaming clubs and hold tournaments, and obtains support funding from the State Sports General
Administration of China. Another is created by social institutions; it does not have the right to

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government support, and the main expenditure comes from brand sponsors. However, the Chinese
government has not established an official department to organise and build a unified management
of these organisations, which means no one is taking responsibility for the whole picture of Chinese
eSports. In this case, the Chinese government should follow the example of KeSPA (see section 2.4),
where the South Korean government established the Korean eSports Association to manage all the
regulations, matches, events and the eSports market (Dailydot 2014).
To sum up, from the macro point of view, the Chinese government has been paying attention to the
development of Chinese electronic sports, particularly with large support from the State Sports
General Administration of China. However, due to considerations regarding the influence on culture,
and for reasons of youth protection, electronic sport still has a negative judgement and limitations
imposed from the Chinese Cultural Bureau. Moreover, legislation for electronic sports urgently
needs to be considered and established.
4.1.2 Economic
China has become the second largest economic power in the world, with 7.7% GDP growth in 2013
(BBC 2014). China’s per-capita income has also been increasing rapidly with the highest
consumption growth rate in the world (China.org 2013), and the Chinese people's standard of living
has been improving. According to The Economist (2010) in 1990, the Engel's Coefficient rate of China
was 54.2%, then the rate decreased more than 20% in the following 20 years, and nowadays the
average Chinese person spends 9 USD on their food and beverage consumption per week. The
Engel's Coefficient will show that the percentage of income allocated for food purchases decreases
as income rises (Investopedia 2014). Engel's Coefficient shows Chinese spend 21% of total money
on their food and beverage consumption. If the percentage is between 20% and 30%, it means a
national average family is relatively well-off, and they have been spending more money on non-rigid
consumption than daily food and beverage consumption. Moreover, according to CNNIC (2014) 40%
of the 600 million internet users in China have chosen leisure entertainment as one of the most
important reasons for going online. The facts above lead to the conclusion that more and more
Chinese people live in prosperity, that people are willing to spend more on entertainment. Due to

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its reliance on computers and the internet, eSport can have rapid development in areas where has
a huge advantage on economy. It is thus clear that based on China's continued economic expansion,
the living standards for ordinary people improved steadily, which helped to create a good
environment for the development of the electronic industry.
On the other hand, at the same time as China's rapid economic development, China’s games market
also achieved excellent results. In 2013, China’s total games market reached 13.8 billion USD with a
record of 38% annual growth rate, and the whole market contains more than 100 different types of
members, such as games publishers, games developers, and games related media (Newzoo 2014).
57% of the market share was taken by Chinese domestically-developed games which were worth
7.9 billion USD, and because of regulations and limitation permits by the Chinese culture bureau, in
2013 the Chinese government approved 291 new games for the Chinese games market, and 92% of
the games were made in China. The facts show that the Chinese games market has a large potential
for investment, but that the Chinese government are very strict on the foreign import of games.
To conclude, China’s economy is developing rapidly, the people are paying more attention to their
leisure activities and entertainment, and on-line surfing and games are getting over 50% of the total
Chinese population. In addition, the Chinese games market is making great profits. These facts are
all going to help the development of Chinese electronic sports.
4.1.3 Social
Nowadays, as society and technology develops, China has a large amount of its population (over
600 million) already using the internet (CNNIC 2014). In addition, in this group of internet users, 400
million are on-line computer games players, which includes on-line games players and electronic
sports games players (Newzoo 2014). It shows the vast size of China’s games market, which could
provide ample market space and user base.

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Age versus Education versus Income
Electronic games players and internet users are two groups which are very difficult to identify and
analyse by splitting them up into two individual parts. There are many areas in commons between
them. As part of a social survey and analysis, this section focuses on comparisons of ages, education
and monthly income of Chinese internet users.
According to statistics by CNNIC (2014), till the end of 2013, there were 31.2% of the total population
of internet users who were in the age group from 20 to 29, and this group made up the largest
proportion of all internet users. The second largest group was 24% of the total population, and the
age of that group was between 10 and 19 years old. In addition, the age group from 30 to 39 also
took 23% of the total population, which means the major internet user group was born between
1964 and 2004, and internet penetration has affected this group the most in China.
Other data show 36% of internet users only had junior high school education, and this is the largest
group (CNNIC 2014). The second largest group were educated in senior high school with 31% of total
population, and the third group with 20% of the total were all college-educated (CNNIC 2014). It
shows the less educated group accounted for a large proportion of Chinese internet users. The
group most affected by the internet was composed of the younger generations with lower level
education; and playing games on-line was the most common reason for them to use internet. This
once again, proves that electronic sports were welcomed and supported by young people.
After that, in the monthly income data, 17% of internet users obtained a monthly income between
200 and 300 GBP, and 15.8% of the total population have a monthly income of between 300 and
500 GBP, which is a lower and medium income in the Chinese average standard of living (CNNIC
2014). On the other hand, almost 20% of internet users had incomes of only 50 GBP or less per
month (CNNIC 2014). The above data leads to the conclusion that more than 50% of Chinese
internet users did not have an expensive lifestyle. In particular, 20% of the total were living on the
poverty line. So, internet surfing and playing games on-line are becoming a low cost entertainment
for the ordinary people in China; and the situation which China is in now, is exactly the same as the

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situation South Korea has been having for 20 years. There are many similarities between the Chinese
and South Koreans, especially in the area of low cost entertainment, such as the internet surfing
and playing computer games.
To sum up, the most popularity for using the internet is among the young generation, and internet
penetration has been greatest among low average living standard people and less educated people.
The young and less educated group in particular, have a very different opinion from their parents
and family about the effectiveness of electronic sports on their life; this is discussed in following
section.
Social pressure of public opinion
Regarding supporting eSports in China, the opinions of the general public are multiple and varied.
Family and parents in particular, mostly hold negative opinions about massively developing
electronic sports in China. According to the survey by He (2013), 70% of a random sample of 500
parents chose ‘do not like their children to play computer games or spend a long time internet
surfing.’ The main reason is it would interfere with their study. As mentioned in section 2.1, the
parents of one of the most famous eSports players, ‘Sky’ XiaoFeng Li, had very serious objections to
him playing computer games. Chinese parents are very protective of their children and their
children’s future, and computer games have already had a large effect on the young generation.
Hence, most Chinese parents will try to oppose any activities which are related to computer games,
including electronic sports. Hence, parental control has become a barrier to developing eSports in
China.
As mentioned in the political section, because of opposition by the Chinese Cultural Bureau and
limitations set by the State Council, the National Radio and TV Bureau cannot broadcast propaganda
on electronic sports programmes; TV and print media also report some relevant negative exposure,
which all influences the popularization of electronic sports. The reaction of Chinese society was
totally opposite that of South Korea. A large amount of TV and print media from South Korea treated

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