“But what does this have to do with you coming to China? You’re not suggesting I play a few more rounds with you, are you?” Huang He said irritably.
“You’ve only half got it right!” Allen Adihan chuckled, “I am indeed here to fight, but not with you. I’m here to participate in the competition you’re organizing. This is the first-ever global professional competition for Warcraft III. After reading your submitted proposal, I was so excited I couldn’t sleep for three days, so I just had to come and see!”
The proposal Allen Adihan mentioned referred to Huang He’s plan for the first National Warcraft III E-sports Competition.
Currently, the competition only existed on paper. According to the agreement with Blizzard, any commercial activity related to Blizzard’s game copyrights required Blizzard’s approval. Therefore, Huang He had submitted the relevant proposal to Blizzard early on. Blizzard had readily approved it, but Huang He hadn’t expected that the proposal would attract Allen Adihan.
Huang He’s proposal was quite simple: establish a Chinese E-sports Alliance, abbreviated as CEA, which would then organize a Warcraft III E-sports competition nationwide.
The competition would begin with city-level tournaments in each provincial capital, selecting the top three players. These champions would then advance to the national finals in major cities like Shanghai and Beijing.
The entire competition would last nearly three months, commencing on the first Sunday after Warcraft III’s release.
Huang He’s objective was straightforward: to capitalize on the e-sports trend and promote Warcraft III with all his might.
By this time, various promotional activities for the e-sports competition were already sweeping across the internet. Not only had the homepage of oo been updated with advertisements for the competition, but many internet cafes also displayed promotional posters. The scale and momentum of the publicity were unprecedented.
“Do you not have company matters to attend to by coming to this competition?” Huang He asked curiously.
“The company has very few major issues now. The project the company is fully invested in has already gotten on track, and those professionals are executing it. I’m actually quite free now!” Allen Adihan said cheerfully.
“I envy you!” Huang He sighed, “Unlike me, I’m busy with company affairs every day, with no time to rest.”
“When we start a company, isn’t our pursuit financial freedom, and then enjoying life at will? Huang He, my friend, now that the company is on track and has scale, you should learn to let go and let professionals handle professional matters. We should just enjoy life and do what we like!” Allen Adihan said with a smile.
“That makes sense!” Huang He nodded. He was very envious of Allen Adihan’s current state, but he also understood that his situation was different from Allen Adihan’s.
Jiangnan, as it was known, appeared very powerful now. The group had dozens of subsidiaries, its reach extending into various industries, and its paper assets had even surpassed 1.5 billion RMB. However, all of this rested solely on Huang He’s shoulders, and every industry was walking a tightrope, with nothing yet stable. Without Huang He to control the overall picture and manage the details, Jiangnan could collapse in an instant.
“Oh, there’s something else I’m very curious about!” Allen Adihan scratched his head, “Are you sure Warcraft III can earn you a profit of 2 million US dollars in this barren market?”
“By the way, what is the price of your Warcraft III? Let me see how many copies you need to sell to break even!”
“Guess?” Huang He asked with a mischievous expression.
“19 US dollars!” Allen Adihan had actually been pondering this question for a long time and had even hired people to investigate the Chinese market. The conclusion was that a price of 19 US dollars per box was likely acceptable to the market.
This price was, in fact, the retail price when omi electronics was the distributor for Warcraft.
“19 US dollars? That’s about 150 RMB after conversion!” Huang He gave him another look of disdain, “In all of China, there are fewer than 100,000 people willing to spend 150 yuan on a game. If you sell it at this price, I won’t be able to recoup my investment for years.”
“Then how much do you plan to sell it for?” Allen Adihan eyed Huang He warily, “However, I must warn you, your selling price cannot be lower than 15 US dollars, otherwise, you’ll be disrupting our market order. Do you know how much our games sell for in the US? A hefty 69 US dollars a box. If you sell it for 15 US dollars, people will directly smuggle it to the US, and my entire price system will collapse!”
“If you dare to do such a thing, I will immediately stop providing your authorization and sue you for breach of contract.”
“Come on, the activation codes here are limited to the China region and can only activate the Chinese version of the game. Americans can’t use them.”
“That’s not necessarily true. As long as they buy the physical version you release, many people will specially create English patches and smuggle them back to the US. Then the Chinese version will become the English version!” Allen Adihan said.
“Oh, don’t worry about that. Apart from the Warcraft III: The Frozen Throne Deluxe Collector’s Edition that we are preparing to release, we do not plan to release any physical versions of the game. Not even a single extra disc will be produced.”
“And this Deluxe Collector’s Edition will be limited to 999 sets nationwide. No one will go to the trouble of smuggling them to the US for you!” Huang He chuckled.
“You don’t plan to release physical versions? Then how will you make money?!” Allen Adihan was stunned.
For Blizzard, setting aside profits from other copyrights and merchandise, their primary source of profit was selling the games themselves.
Generally, there are two sales channels for games: online digital activation codes and offline physical disc versions.
Online digital activation codes are usually priced quite cheaply because players only need to download the game online and then purchase an activation code. The cost to game developers is negligible, so the price is naturally lower.
For example, when Warcraft II was released, the digital version of Warcraft II was priced at 39 US dollars, which was about half the price of the 69 US dollar physical version.
As for offline physical versions, they are more elaborate. Besides a few discs containing the game, they usually come with game concept art books, signatures from the creators, one or two game soundtrack CDs, keychains or backpack charms, and a couple of small figurines as merchandise.
These items, with a combined production cost of no more than 5 US dollars, could increase the selling price by 30 US dollars, making the profit from physical versions astonishing.
Therefore, for the initial release of Warcraft III, they didn’t plan to release online digital versions, allowing eager players to purchase the physical versions first. Only after the sales of physical versions gradually declined would they release digital versions, making money twice – a perfect strategy.
However, based on experience, the sales of digital versions would be significantly lower than physical versions, only about one-fifth. Physical game versions were virtually the economic lifeline for Blizzard, so Allen Adihan couldn’t fathom that Huang He would actually not sell physical versions of the game, with only 999 deluxe sets.
“Physical versions don’t make much money anyway. As you just told me, I can only sell them for a minimum of 15 US dollars, and that price is by no means acceptable to Chinese players. Instead, it would make players think I’m too greedy and not worth the effort. So why should I sell physical versions?” Huang He asked.
“But you’re not allowed to sell your online version for more than 15 US dollars either, otherwise, they won’t need to smuggle physical versions from you; they’ll just download the digital version online, buy an activation code, and then install an English patch. You’ll ruin me!” Allen Adihan threatened Huang He.
“Heh, don’t worry about that. I’m not selling the online digital version either!” Huang He said with a smile.
“You’re not selling the digital version either? Then what are you selling?” Allen Adihan was completely astonished.
“I’m not selling it. I’m letting all players across the country play for free!” Huang He said calmly. Allen Adihan looked as if he had been struck a heavy blow, his cheeks turning bright red. Those who didn’t know might think Allen Adihan had some peculiar hobby and was reacting to Huang He.
“Huang He, if you dare to do this, I’ll immediately destroy the copy I have in my hands!” Allen Adihan jumped up and said.
“Ah, Mr. Allen, if you destroy the copy, according to the contract, you’ll have to compensate me 20 million US dollars!” Huang He said with a smile.
“Nonsense, you’re the one breaching the contract. I should be the one demanding 20 million US dollars from you!” Allen Adihan retorted.
“How have I breached the contract?” Huang He spread his hands. “The contract states that I cannot sell the game for less than 15 US dollars per copy, but the contract never stated that I cannot provide the game to players for free!”
“Therefore, I have not breached the contract at all. On the contrary, if you cannot deliver the game copies to us at the time of release, then Blizzard will be in breach of contract!”
“You… you…” Allen Adihan’s vision blurred with anger. Just as he was about to faint, Huang He caught him and said with a smile, “Alright, my dear Mr. Allen, if I guarantee that no one can steal your game from me, nor can they take it to the US to sell, you should be satisfied, right?”
“That’s impossible. Don’t try to trick me. There’s no game that pirates can’t crack in this world!” Allen Adihan said with deep loathing.
“What if I’m selling an online game, not a standalone one?” Huang He retorted.
“An online game?” Allen Adihan was stunned. That was an answer he had never considered.