PlayStation 4 Preparing to Launch in China

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Sony Corp. (NYSE: SNE) has established two joint ventures with Shanghai Oriental Pearl Culture Development (OPCD) to make and sell the PlayStation consoles and video games in China. In January, the Chinese government lifted a restriction on consoles that had been in place since 2000.

Microsoft Corp. (NASDAQ: MSFT) announced its entry into the Chinese market in April. The Xbox One will become available in September through a joint venture the Redmond, Wash., company has established with China’s BesTV.

Chinese gamers have only been able to play games on PCs and mobile devices. Gaming consoles were banned by the government as a distraction for children. The new PS4 and the Xbox One have much broader connectivity and thus have achieved the status of being an educational device rather than just a time-waster.

The government now allows the consoles to be sold in the country but it will continue to censor or ban games that it believes are controversial or subversive. Earlier this year the country’s minister of culture said, “We want to open the window a crack to get some fresh air, but we still need a screen to block the flies and mosquitoes.”

China’s video gaming business is already worth more than $12 billion, virtually all of which is spent on PCs and mobile devices. About 90% of that has been spent on PC-related gaming and the rest on phones and tablets.

Sony’s partnership with OPCD will result in the creation of two companies: Sony Computer Entertainment (SCE) will be 70% owned by Sony and is presumed to be the software side of the operation, and Shanghai Oriental Pearl Sony Computer Entertainment Culture Development (it probably sounds better in Mandarin) is the hardware and sales side of the business and will be 51% owned by OPCD.

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