Video Games in China: PC Gaming still Dominant?

July 20, 2015

10:00 pm

The gaming industry in China has always been a difficult market for Western companies to penetrate. In the 1990s, high entry costs for customers and high piracy rate for developers and publishers were amongst the biggest roadblocks for Western companies to develop within the online gaming industry in China. Even gaming conglomerates like Sony, Nintendo, and Microsoft had limited presence in the Chinese market. Furthermore, regulations were more stringent back then.

However, in 2014, regulations were softened, offering the possibility for foreign companies to produce and sell video game consoles and games in China by partnering with a Chinese company operating in the foreign-trade zone. The condition is to pass the Chinese content review process of the administration. The government has introduced these guidelines mainly to prevent Chinese gamers to face what they see as Western immorality and racial/ethnic culture. Anything that harms public ethics, promotes obscenity, drug use, violence or gambling is strongly prohibited and Western games is sometimes considered as a support for the introduction of these ideas in China. For example, the game “Grand Theft Auto”, a ludicrously popular game in the Western market, failed to make it into China. It was due to the plot and setting of the game which involves inappropriate actions such as general violence, crime, ethnic discrimination, sex minigame and drunk driving that infringes China’s beliefs.

Adhering to cultural differences

As Western and Eastern markets are culturally very different, developers and publishers may opt to create games exclusive to the Eastern market. This is a possible option, however, companies would require a huge investment on new development teams, software, and they would also have to adhere to new regulations, taxes and strategy to attract Chinese gamers. Furthermore, understanding the market and the local culture is equally important. In Western countries such as US and Europe, role-playing games are regarded as insignificant but in China, online games have known to have considerably impacted China’s politics. China Communist Youth League (CCYL) used gaming as a marketing strategy (also called “gamification”) by employing online games as platforms to generate “national spirit” amongst young players to achieve various political goals. Online games have also shaped the Chinese business culture e.g. Coke, Volkswagen and local Chinese companies (i.e. Master Kong) have utilized gaming as a way to advertise their products.

Alternatively, companies could create ports that could censor existing games to comply with new guidelines but this can lead to future problems. The common route or the more lucrative route companies normally take is by developing a game which is similar to their existing platform solely to fit the Chinese market. One of the three biggest global players in the gaming industry, Activision Blizzard, has achieved approval from the Chinese Cultural Department to release a game called “Call of Duty”, a top tier game developed by an elite team. Activision has partnered with China’s largest and most use internet service portal, Tencent to tailor and release this unique game to the millions of interested Chinese gamers.

Market segmentation

The gaming industry shows a growth trend for its 5 different markets. These include the mobile gaming market, console gaming market and the PC gaming market (Client Game, Webpage Game, and Social game).

In our experience has always been the PC gaming market dominating the country’s gaming industry. Nevertheless, console games are catching up and becoming more popular these days.

In January 2014, the government removed its self-imposed ban on video game consoles opening a new market and opportunities to international companies like Microsoft, Nintendo, Sony etc. Even though regulations are strict in China, the $13 billion Chinese gaming market is difficult to ignore. Hence, companies found this as a good opportunity to expand their market presence in China. Examples include:

  • Microsoft has brought Xbox One to China in 2014 with 100,000 orders (including pre sale)
  • Sony has recently opened a new China Strategy Department
  • Nintendo has plans to expand their market share to China and they are the only company that has the least possible chance in terms of violation of rules. However, the company has difficulties as they are not as well known to Chinese consumers as compared to Sony and Microsoft

7c336f4a-7734-468a-9c53-1e26457b5bae-large

Mobile gaming market

In 2014, the mobile gaming market has continued to grow as the market size doubled. Based on past figures, mobile gaming industry has been a booming trend, reaching more than RMB 27 million in 2014. This is the first time in history China mobile gaming industry took in more revenue than PC gaming industry. However, in spite of these high-revenues, more than 92% of companies had lost money due its high cost.

PC gaming market

PC gaming market has proven to be most successful in China. For example, Guild Wars 2 was released in China and they had sold 500,000 just in pre-orders alone. However, competition is tougher for foreign companies in this area and it is difficult to make profit unless companies go on freemium basis to attract Chinese players.

 

Image Credit: Flickr/Yiannis Theologos Michellis

Tags:

Did you like this article?

Get more delivered to your inbox just like it!

Sorry about that. Try these articles instead!

Thibaud Andre is a French consultant working at Chinese market research firm Daxue Consulting. He is passionate about Chinese culture and likes to share insights about the many emerging markets of the Middle Kingdom.

Leave a Reply

  • (will not be published)
Startup_Mixology_300x250