By Paul Carsten
BEIJING (Reuters) - Japan's Sony Corp and China's Shanghai Oriental Pearl Group Co Ltd will set up two joint ventures to make and market Sony's PlayStation games console in China, Shanghai Oriental Pearl said in a stock exchange filing on Monday.
One joint venture will be responsible for the console's hardware, while the other will be focused on software, the company said in the filing to the Shanghai Stock Exchange.
The joint ventures, which will be in Shanghai's free trade zone, will be set up by a subsidiary of Shanghai Oriental Pearl and by Sony's China arm.
But China is likely to be a difficult market for games consoles, which were banned from 2000 until last January. Piracy and smuggling of consoles is rife, and the Chinese gaming market is very different to traditional console markets like Japan, Europe and the U.S. as Chinese gamers predominantly play PC and mobile games.
Chinese games developers and publishers have also adopted a "free to play" model where games are free and they make money by selling in-game upgrades like extra lives and special weapons. Games consoles traditionally make their money from the sale of the console and games themselves.
Sony and Shanghai Oriental Pearl are setting up the joint ventures in response to the suspension of the ban on game consoles within Shanghai's free trade zone, a Sony Computer Entertainment Inc spokesman told Reuters.
Nothing has been decided regarding the development of operations, and details will be announced later, the spokesman said.
Sony Computer Entertainment Inc is the Sony unit responsible for the PlayStation.
One of the joint ventures will have registered capital of 10 million yuan ($1.60 million) and will be 51 percent owned by Shanghai Oriental Pearl Culture Development Co and 49 percent owned by Sony (China), Shanghai Oriental Pearl said in the filing.
The other will have registered capital of 43.8 million yuan and will be 30 percent owned by Shanghai Oriental Pearl Culture Development Co and 70 percent owned by Sony (China).
Sony's move comes one month after Microsoft Corp and its joint-venture partner BesTV New Media Co Ltd announced they would launch Microsoft's flagship Xbox One games console in China in September.
Earlier in April, Shanghai's government said console makers such as Sony, Microsoft and Nintendo Co will be able to manufacture and sell consoles in China through "foreign-invested enterprises" in Shanghai's free trade zone, after temporarily lifting the ban on consoles in January.
China had banned game consoles in 2000, citing their negative effect on the mental health of its youth.
(Additional reporting by Beijing Newsroom and Reiji Murai in TOKYO; Editing by Christopher Cushing)