Sony Corp (ADR)(NYSE:SNE) and Shanghai Oriental Pearl Group have come together for the setting up of two joint ventures to engage in the production and sale of Sony’s PlayStation games and consoles in China, as informed on Monday by Shanghai Oriental Pearl in a stock exchange filing. The hardware of PlayStation will be manufactured and handled by one joint venture while the other will focus on the software aspect, as informed by Sony in the Shanghai Stock Exchange filing.

Details of the venture

Sony Computer Entertainment is the unit responsible for the PlayStation and it informed that in response to the suspension of the ban on game consoles within Shanghai’s free trade zone, the collaboration between Sony Corp (ADR)(NYSE:SNE) and Shanghai Oriental Pearl took place. The details are yet to be announced by the company. One of the Shanghai Oriental Pearl’s subsidiary and Sony’s China arm will together set up the two joint ventures described above in the Shanghai’s free trade zone.

The registered capital of one of the ventures will amount to $1.6 million (i.e.10 million renminbi). Of this, Shanghai Oriental Pearl Culture Development will own 51% while Sony’s China operation will own 49%.  The registered capital of the other venture will amount to 43.8 renminbi of which Shanghai Oriental Pearl Culture Development will own 30% while Sony’s China operation will own 70%.

A month earlier, Microsoft Corporation (NASDAQ:MSFT) with BesTV New Media, who is its joint-venture partner, announced their plans of introducing Microsoft’s Xbox One game console in China in September and now Sony Corp (ADR)(NYSE:SNE)  has come up with similar plans.

Chinese market holds big potential

The gaming consoles were banned from sale in Mainland China from 2000 until January 2014 and therefore selling here is going to be difficult. The Chinese market is characterized by widespread smuggling and piracy of gaming consoles. Computer and mobile games are more preferred by the Chinese gamers and this differentiates the Chinese gaming market from the traditional console markets like Japan, Europe and the United States.

The Shanghai government had temporarily lifted its ban on gaming consoles in China in the month of January, and in April it made an announcement that the manufacturing and sale of gaming consoles in Mainland China will be possible for the console makers in the free trade zone of the city through “foreign-invested enterprises”.

A ‘free to play’ model has been adopted by the Chinese game developers and publishers, and under this model in-game upgrades, like extra lives and special weapons, are being sold for making money by the game.