China Gaming Industry | 5 Facts
The Chinese Grey Market
The story of the Chinese games industry is one of distribution. The fact that the international version of Steam (which is technically banned) compared to its local counterpart speaks to 2 things.
1) Just how BAD China steam is in terms of game catalogues
2) Just how pervasive VPN’s are amongst PC gamers.
Steam supports Chinese language, and more crucially, it is possible to pay for games on Steam using the Chinese currency Renminbi either through WeChat Pay or Alipay, the two largest e-payment services in China. That being said, games that are sold via Steam international are not approved by the NPPA (which we’ll discuss in a second). What makes things even murkier is the presence of “game-boosters” like Miao for example, which can be game-only VPN’s effectively. These are legal, even if the underlying games being access are not.
Regardless, the size and murkiness of how non-licensed games are distributed in China’s grey PC market is vulnerable to regulation. With regulators becoming more involved in recent years how how games are designed and played in China, Valve is walking a tightrope on this sort of business.
Oh by the way - for those thinking “What about Steam’s China Client?” it only has 103 games. Steam international has 73,000. So…yeah.
The Role of Regulators
Let me just walk through the process of getting a game released and distributed in China to supplement the above graphic.
Preparation: The first step for a game developer or publisher, whether domestic or foreign, is preparing to submit the game for review. This includes ensuring the game adheres to China’s strict content guidelines, which prohibit things like excessive violence, gambling, or other sensitive content.
Application: Once that’s sorted, the developer must apply for approval from the NPPA (the government body that oversees video game licensing). This involves submitting a detailed description of the game, including its storyline, characters, game mechanics, and visuals, as well as any promotional materials and a game script. There are many agencies in China that can help firms with this stage such as Yodo1 Games.
Review: After submission, the NPPA reviews the game to ensure it complies with all regulations. This review process can be lengthy, taking several months. The NPPA evaluates the game based on all the criteria we listed above.
Issuance of Licenses: If the game passes the review, the NPPA will issue a publication license. There are two main types of licenses:
Domestic Game Number: For games developed within China. This license allows developers to publish and monetize their games within the country.
ISBN Number for Imported Games: For games developed outside of China. This license is necessary for any foreign game to be sold in the Chinese market.
Post-Approval: Even after approval, games are subject to ongoing monitoring. Changes in content or updates to the game often require re-submission for approval.
Market Release: Once a game has received its appropriate license, it can be officially released in the Chinese market. Developers and publishers typically work with local partners to facilitate distribution and marketing in line with local business practices and regulations.
The punchline here is that the NPPA needs to manage both licensing enough games for a healthy gaming industry, but also not flood the market and go against other government regulation about curbing video game playtime. It’s like convincing your parents to buy you a new game, but also abiding by their rule to only play it on the weekend. Except in this, your mom is the NPPA lol.
Pareto Would Be Proud
We saw this with our post of the Korean games industry, the idea that a majority of revenues come from a very small handful of titles. This pareto principle applies not only in the PC space (as shown above) but also in mobile.
Many developers are lured by the promise of the the lucrative Chinese gaming market - a digital shangr-la of high MAU’s and ARPU’s but the issue is that unless you’re in the top 50…maybe top 200, you’ll have a hard time finding massive commercial success. When this reality is put against the costs and effort needed to get an ISBN from the NPPA and the business case for entering this market gets trickier.
No wonder that 50% of games in the top 10 are made by Chinese devs. The remaining 50%? They have joint venture agreements with Tencent Games (in the case of Dungeon Fighter Online) or NetEase (in the case of World of Warcraft). We explored this notion in muuuuuch more detail over on my deep dive with Jason Yen, learn about this and more below:
A Tale of Two Companies
This twin narratives have been something I’ve been following for a long time.
Let’s start with Bytedance by highlighting that one of my very first posts on this blog post was about Bytedance’s entry into gaming.
📄 Learn more about Bytedance’s Gaming Strategy here
It’s a shame they are so quick to pull back from this gaming entry. We don’t know for sure exactly how each of their titles performed, but we can guess. Just looking at Moonton’s MLBB with a very vibrant and successful esports scene across Asia and Middle East/North Africa. Marvel Snap is funny because despite it being a breakout hit and receiving much praise, there have been concerns that the game is actually under-monetized (a word I thought I’d never type to describe an F2B mobile game). If you’re curious about this, take a look at Deconstructor of Fun’s breakdown.
Mihoyo is funny because they just doesn’t miss. Like really, they just deploys ultra polished, addictive, multi platform titles that scale well across markets, find whales, and maintain market dominance over many years. So easy right? Sure there have been concerns recently about Genshin’s events not holding a candle to Honkai’s, but both titles still stand firmly in the top grossing charts in so many countries. I’m bullish on Mihoyo long term as they’ve proven convincingly that Genshin wasn’t a one-off and that they’re IP (characters, worlds etc.) actually matter to players long term and can be leveraged in future titles.
The Importance of Female Representation
This graphic speaks for itself in my opinion but I’ll finish by expanding on the point about female representation in the bottom right.
What I love about the games industry is how much it doesn’t care about your background. It’s what inspired me to explore Africa of all places in this post. When westerners look to Asia and see such promising stats about female gamers getting involved across such different platforms and different genres (e.g. 78% horror preference amongst women surprised me tbh), it can be seen as quite progressive. Hearing that over 50% of Niko Partners survey respondents were “dissatisfied with how women are portrayed in games” is a bit of a gut punch, not going to lie. Women in china are active, paying customers of this medium and they’re not exactly getting rewarded for it as much as they should.
The good news is that this is something that can be fixed and as more progressive studios come through focused on this segment, we’re one step closer to a healthier gaming industry. In fact, I’m very proud to be working with one such studio, Simply Sweet Games, a Canada based outfit founded by two incredible gals, Tina Merry and Carina Kom. Keep your eyes peeled for their new game “Criss Cross Castle” to support them! 👀
