The9 will operate South Korean-developed Huxley, an online first-person shooting game (FPS), in the Chinese mainland this year to ease its high dependence on MMORPG game the World of WarCraft (WoW).

Market share

"The diversified game type leaves opportunities for many newcomers and the competition will turn more heated," said Chen.

The combined game revenue market share of the top three was 58 percent last year, compared with 75 percent a year ago. Small game firms, like 9you.com, Tencent (QQ) and Kingsoft Corp, will grab market share from the top three, according to iResearch.

The leader, NetEase, with a 24.1 percent market share in 2006, has had mixed reviews.

Hou said NetEase's market share will decline as its coming games Westward Journey III and Tianxia II received worse-than-expected market response among players.

But Chen gave an optimistic forecast on NetEase as it has such a large range of products.

Shanda, with a market share of 20.8 percent last year, will face a tough year as it hasn't "killer-application" games like NetEase's Westward Journey series or The9's WoW, the world's most popular game, analysts said.

The9, boosted by WoW and with a new-generation WoW just around the corner, will probably expand market share this year from 13.6 percent in 2006, analysts said.

Other issues

Mature virtual items and a money trading system haven't been established in China, which has raised many concerns, such as online gambling and computer worms.

The hackers can easily sell stolen items online.

It is unclear whether the government will introduce a new policy to regulate the sector.

Meanwhile, the potential stars will rush to go public.

The list of the possible overseas initial public offerings includes Kingsoft, 9you and Shanghai-based ZT Networks Science Technologies Co and Beijing-based Perfect World.

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