Dragon Oath Introductory Q&A

MMORPG.com:

Before we discuss Dragon Oath, please briefly introduce your company and its relationship to the Chinese internet giant, Sohu

Jun Tan:

I am very glad to introduce about our company since this interview represents the first official disclosure of our company to MMORPG players in North America. ChangYou.com (US) Inc. is the US subsidiary of one of the leading online developers and publishers in China, Changyou.com Limited (NASDAQ: CYOU). Domestically, we have published two popular MMORPGs, and now, with a third ready, we have decided to undertake the challenge of entering the western market because, after long, careful researches and monitoring of the relevant trends, we are certain that our titles can be very competitive, with strong potential to succeed by adapting them to this market and the players here.

Sohu.com Inc. (NASDAQ: SOHU) is China's premier online brand, and indispensable to the daily life of millions of people. It provides a network of web properties and community-based / web 2.0 products that offer its vast user community a broad array of choices for information, entertainment and communication. ChangYou.com Limited is an indirect subsidiary, and the holding company for its MMORPG business vision.

MMORPG.com:

What titles do you currently operate in China, and what is the status of the first one you will launch in the west, Dragon Oath?

Jun Tan:

Sohu.com Inc. (NASDAQ: SOHU) is China's premier online brand and indispensible to the daily life of millions of Chinese people in China. It provides with a network of web properties and community based/web 2.0 products which offer its vast user community a broad array of choice regarding information, entertainment and communication.

ChangYou.Com Limited is organized as an indirect subsidiary of Sohu.com Inc. to be the holding company for its MMORPG business vision.

MMORPG.com:

What titles do you currently operate in China, and what is the status of the first one you will launch in the west, Dragon Oath?

Jun Tan:

In China, we currently operate two MMORPGs, including Dragon Oath (Tian Long Ba Bu in Chinese), which we developed in-house, and the licensed Blade Online. Dragon Oath will be our first release for western players. Domestically, it has been a great success from the moment it launched. It gained sensational reactions from players, and exceeded all our expectations, which was a very pleasant surprise. Naturally, we have developed countless patches and versions to keep our game fresh. As a result, both the number of active users and revenue are growing rather nicely.

We are currently working on localization of the product and website. For nearly six months now, we have concentrated our efforts optimize Dragon Oath for western players.

MMORPG.com:

Would you tell us a little more about Dragon Oath? What's most appealing about the game?

Jun Tan:

It still a bit early to disclose detailed information about Dragon Oath as we are undergoing internal testing phase at this time. However, I can provide some general information.

Dragon Oath is a massively multiplayer game focused on martial arts and community building. Based on the very popular Chinese novel "Tian Long Ba Bu" (Tale of Eight Demigods), it incorporates many missions and activities that follow the original storyline, which has also been adapted to add new features and characters. These elements allow players to develop their own personalized experiences, and also to foster virtual social relationships, which we have designed to appeal across a diverse range of interests.

The combination of martial arts and community building has strong appeal. Fighting-based games often have high player participation when they are launched due to the excitement level of the content, but users may leave rapidly as their initial enthusiasm fades. Conversely, community-based offerings can experience more gradual growth as they build their relationships with each other. However, they also tend to have longer life spans since these bonds strengthen over time.

MMORPG.com:

Just how popular is Dragon Oath in China, and why has it attracted players in the very competitive market there?

Jun Tan:

Dragon Oath is very popular, perhaps even incredibly so. As of the first quarter of 2009, it has almost reached one million concurrent users. The main reasons for such massive popularity include its uniqueness of features and its depth. It is very easy to play while having very deep features and systems. Also, it has an excellent economy.

But most importantly, it has a superb community system. I am certain that Dragon Oath will help change the reputation of free to play games because of its uniqueness, and especially due to a special concept we built as the basic platform from the beginning of development, "community MMORPG". It's definitely something few western players have experienced.

MMORPG.com:

Please explain what you mean by "community MMORPG" so that we can better understand the term.

Jun Tan:

What I wish to stress today is that Dragon Oath is built to be community-focused. The basic platform including all the features, systems and content is made to promote community. As we watched other companies publishing their games, we saw that most were hardcore, grinding and single-play oriented. They tried their best to make individual-oriented titles group-oriented since that's what western players want and enjoy.

However, there's always a limit to how well this can be done. Changing or modifying a title's surface isn't complete westernization. The most important factor is the basic conceptual platform of the contents from the very beginning of development. From the very start, we built Dragon Oath to be community-oriented. As our pre-closed beta begins, we will disclose more details.

MMORPG.com:

What is the difference between pre-closed and closed beta, and when this phase of testing begin?

Jun Tan:

Our pre-closed beta is different from in terms of the recruitment of participants and confidentiality. We will recruit a highly limited number of players who are willing to participate and provide feedback for our last stage of westernization.

For about five months now, we have been in an internal testing phase we call pre-closed alpha. Pre-closed beta will likely to begin sometime in late June, and will finalize our QA and the westernization of Dragon Oath. Right now, our focus is on finding the kinds of testers we want. Recruitment will begin very soon.

MMORPG.com:

Are you doing anything different to set your westernization process apart from that of other imported titles?

Jun Tan:

Most companies finalize their localizations or westernizations using their own staff. They then hold closed betas, but mostly for marketing purposes. We're not doing that. Instead, we're focusing on actual MMORPG players who are very familiar with the concepts and basic game content platforms of western games - because they'll be the people who play Dragon Oath. If they say we aren't ready, then we aren't. If they say we are, then we are. We'll make our decisions based on their feedback. We will try our very best everything to see the game from their perspective, not ours.

MMORPG.com:

What business model are you going to pursue for Dragon Oath and other upcoming titles?

Jun Tan:

Yes, it will be free to play with an in-game shop. Many western players misunderstand that Asian MMORPG publishers use this business model due to their titles' lack of the depth and quality. I would like to assert strongly that this does not apply to all games. In North America, the subscription segment of the market may still be larger, but this is changing; as more free to play titles are published, they are gaining overall market share.

The reason we chose this model is because it's what we use in China, where about 80% of the total MMORPG market is free to play. It is just a way of doing business; it has nothing to do with the quality of the games. Neither does selling subscription-based MMORPGs in retail boxes. It's just what western players are used to. In fact, the market is adapting. Some researchers even project that within three to five years, many pay to play publishers will have either switch to the free to play model or derive much of their revenue from it.

MMORPG.com:

Would you briefly tell the readers about the launch schedule for Dragon Oath?

Jun Tan:

Well, it will depend on how it goes during pre-closed beta. At this moment, we expect to finish our internal testing by around the middle of June, and to start the pre-closed beta in late June, running for about three weeks. And of course, we'll then begin closed beta, probably in July and August, when all the students are enjoying their summer vacations!

MMORPG.com:

Since many westerners are unfamiliar with the Chinese market, how competitive is it, how quickly is it growing, and what is your company's standing?

Jun Tan:

In 2007, the MMORPG market size in terms of revenue was $1.8 billion US, but by 2011, it's expected to reach over $5.5 billion. It is growing very rapidly, thanks to the fast growth of the internet bandwidth. Also, the market in China is larger than that of the US in number of players and total potential revenue.

There are over 300 MMORPG publishers are in China. We are one of the top three, which means we are very large and well known. As I mentioned, Dragon Oath by itself has almost one million concurrent users.

MMORPG.com:

Do you think Dragon Oath's popularity in China means it's more likely to succeed in the west?

Jun Tan:

I am well aware that the popularity in China doesn't automatically translate into success in the west. However, we are confident because we have other titles as well. But first, players will be surprised by Dragon Oath's uniqueness. Want to see how different it is? Then feel free to try it out!

MMORPG.com:

Since you're looking beyond just Dragon Oath, what's your company's overall vision with respect to MMORPG players in the west?

Jun Tan:

First of all, I'd like to thank everyone who read this interview. It was my pleasure to discuss our company for the first time through MMORPG.com. I promise that once the internal testing phase is over, we will provide more detailed information about Dragon Oath. Please remember that our game is designed to be a "community MMORPG". It's made for people to play together, and to make new friends. Your readers will understand the things I've stated in this interview better when they know more about the game's features, content, etc.

Our vision is simple. We want to provide the kinds of fun, interesting MMORPGs that all types of players can enjoy regardless of genre, age, gender, etc. We want them to enjoy playing with their personal or internet game friends in an environment that doesn't require them to pay monthly fees.

Lastly, we'd like to emphasize that Dragon Oath is a different game from other free to play MMORPGs western gamers have seen. However, words can't express this completely, so we sincerely hope that your readers keep their eyes open during the launch process, and that they will give it a try when it becomes available.