The9 Limited Gets Smashed

Revenue was up 35 percent but earnings were 4 cents short of estimates.

Part of The9's problem, Brueschke said, is that it is using very expensive
Hewlett-Packard servers to operate the game. The better it does, the more server
farms have to be added, hurting profits.

Furthermore, the game is still in its early, low-margin,
"investment phase," and its higher-margin phase is still many quarters away, the
analyst added.

That first thing kind of sucks because as the game gets more popular then expenses will rise at the same time. I wonder what this higher margin phase will be as well. World of Warcraft is kind of getting long in the tooth as video games go and I have heard about a dropoff in interest for the game.

Maybe Chinese gamers are different then US gamers and they lose interest in the game at a slower rate but I'm not so sure. I'm sure the expansion will bring more players back to the game and have more players pick it up but that will peter out eventually. I guess that is the danger of having only a single item that you derive the majority of your revenue from.