Microsoft and BesTV alliance is a good sign

Microsoft Corp's new alliance with BesTV New Media Co, a Chinese Internet protocol TV service provider, will help the US-based software giant to make inroads into China's video gaming market after the company failed to launch its Xbox products and services in the country.

On Monday, BesTV, a subsidiary of one of China's major broadcasters - the Shanghai Media Group - said in a filing with the Shanghai Stock Exchange that it has formed a joint venture with Microsoft, to develop "next generation family gaming and entertainment products" and offer related services.

The total investment in the joint venture is $237 million, with BesTV holding a 51 percent stake and Microsoft 49 percent. The joint venture will have a registered capital of $79 million.

Analysts pointed out that Microsoft might finally be able to successfully launch its video gaming business in the Chinese market based on the cooperation with BesTV. Since the joint venture will be registered in Shanghai's pilot free trade zone, Microsoft might be allowed to offer gaming products and services to Chinese mainland customers.

The Chinese government said in July that it will allow foreign game console companies to sell their products in China if they register in the Shanghai free trade zone and go through a content endorsement program, relaxing a decade-long ban targeting the country's game console market.

In 2000, seven Chinese ministries jointly banned the manufacturing, sale and import of game consoles in China on fears of potential harm to the physical and mental development of young people.

However, products from major game console companies across the world, such as Microsoft, Nintendo Co Ltd and Sony Corp, are still being exported to China via illegal channels.

The joint venture between Microsoft and BesTV creates a legal platform for the US company to sell its gaming products and services, said Xue Yongfeng, an analyst with Beijing-based research firm Analysys International.

"However, the question remains. Will Microsoft truly sell its Xbox products under the joint venture or will it just design tailored products and services for China?" Xue said, pointing out that Microsoft did not unveil detailed information regarding the joint venture's business model.