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Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Welcome to Shanda Interactive Entertainment 2008 second quarter earnings conference call. The conference call will be recorded and available for replay in its entirety. A copy of Shanda's second quarter 2008 announcement can be found and downloaded from its corporate website, www.snda.com.
At this time, all lines have been placed on listen-only mode and the floor will be open for questions following today's presentation. I would now like to turn the call over Ms. Maggie Zhou, Shanda's IR Manager. Please proceed, ma'am
MAGGIE ZHOU, IR MANAGER, SHANDA INTERACTIVE ENTERTAINMENT LTD.: Thank you. Good morning and good evening to all participants. On behalf of Shanda, I would like to welcome everyone to our second quarter 2008 results conference call. Here with us today are Mr. Tianqiao Chen, our Chairman and CEO, Mr. Alana Qunzhao Tan, our President and Chief Technology Officer, and Ms. Grace Wu, our Chief Financial Officer.
Before we begin, I would also like to remind you that management comments during the call will contain forward-looking statements that are based on our current expectations and are intended to qualify for the Safe Harbor from liability for such statements established in the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact during the conference call are forward-looking statements which are subject to significant risks and uncertainties. Actual results may differ materially different from those contained in the forward-looking statements. So please do take a minute to read the Safe Harbor statement in Shanda Interactive Entertainment's second quarter 2008 press release.
In addition, please note, for discussion purpose, all numbers were translated into US dollars, based on an exchange rate of RMB6.8591 per US dollar.
Now with that, I would like to turn the call over to our Chairman and CEO, Mr. Tianqiao Chen.
TIANQIAO CHEN, CHAIRMAN AND CEO, SHANDA INTERACTIVE ENTERTAINMENT LTD: Thank you Maggie. During the second quarter, Shanda continued to make significant progress towards the Company's development as a global entertainment media company, through the execution of its three C strategy of content, community and commerce.
Despite the impact of devastating earthquake, Shanda achieved its 10th consecutive quarter of growth since initiating our CSP model in late 2005, with revenues reaching $122.1m in Q2 '08, a 7.4% increase from Q1 '08. This exceeds our prior guidance of 0% to 5% growth.
Shanda's ability to maintain quarter-on-quarter growth and to successfully execute our three C strategy is attributable in large part to our employees. The dedication and commitment of our employees and their ability to strategize, innovate and execute are the backbone of our success.
In recognition of this contribution of our employees to our continued growth and development, we applied both general and merit-based salary and a benefit increase in Q3 '08 at approximately an average rate of 20%. We have recruited and retained, and aim to continue to attract the best talent to Shanda by offering the most of competitive compensation package.
In July 2008, the Company also announced the establishment of Shanda Literature, or SDL, in addition to our current two business units, Shanda Online and Shanda Games, to further enhance the Company's three C strategy of content, community and commerce.
Shanda Online operates the Company's integrated E-commerce system and virtual community platform. Shanda Games will operate our online games and will continue its balanced portfolio approach and innovative multi-channel sourcing strategy, which together support a diverse offering of games, targeting a broad range of user base.
Shanda Literature serves as a leading online publisher of original user-generated literary work in China, with three different literary platforms, Qidian, [Jeng Jung] and Hongxiu, which represent a small portion of our overall revenues, but have a dominant position in the Chinese online original literature market.
While online game continue to remain as our primary content offering, we are also exploring other growth opportunities and leveraging the advantage of our community and platform.
As we emphasized many times in the past, content attracts users. Community and commerce help retain users and monetize the user-base and in turn attract more users.
Shanda's operating platform will continue to integrate our various online communities, such as the online game communities and online literature community, leverage the advantage of the Web 2.0 community, and achieve sustainable and scaleable long-term growth.
Last, but not least, as Shanda continues to evolve as a global entertainment media company, we remain committed to explore various opportunities to converge the real world and virtual fantasy world experienced by our users.
Now I will turn the call over to Alan, our President and CTO.
ALAN QUNZHAO TAN, PRESIDENT AND CTO, SHANDA INTERACTIVE ENTERTAINMENT LTD: Thank you, Tianqiao, and welcome everyone. Despite the seasonal weakness in casual games and the 3D games service suspension during the national mourning period in May, Shanda achieved another quarter of solid growth for the second quarter of 2008.
Online game revenues grew 47.7% year-over-year and 6% quarter-over-quarter, to a record high of $117m, as a result of a successful execution of our diversified portfolio strategy, which is further enhanced by our unified community strength.
During the second quarter, we continued to boost the growth of our existing titles by releasing a total of 43 expansion packs for our game portfolio. We also organized customized in-game promotions, targeting each game, and had various online and offline activities to enhance user interaction and communication.
In terms of new games, we launched a full commercial service for Might and Hero, a Web-based RPG in June and received encouraging user feedback. In addition, three MMORPGs and one casual game, namely (inaudible), Tales of Dragon, The Conqueror and [X Up] entered into beta testing during the second quarter.
Net revenues from our MMORPGs in the second quarter rose 8.5%, quarter-over-quarter and 47% year-over-year to $101.3m. As a result of growing -- of growth in existing titles, we continue to launch content upgrades, as well as partial contribution from new title.
Active paying accounts for MMORPGs grew 3.1% quarter-over-quarter, to a record 4.2m in the second quarter of 2008. Monthly ARPU for MMORPGs increased 5.2% quarter-over-quarter, to RMB54.7 in the second quarter.
Our casual game revenue declined 7.8% quarter-over-quarter, to $15.7m, but increased 52.1% year-over-year. The sequential decline in casual game revenues is primarily due to seasonality in casual games for which the first quarter of each year is usually a high season, with the winter holidays and Chinese New Year.
Active paying accounts for casual games declined 14.1% quarter-over-quarter, to 1.65m. Yet ARPU for...
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