The Chinese are among the most tech-savvy consumers in the world. Surfing the net is the favorite leisure activity of Chinese Generation Y and the second most preferred activity among Chinese consumers after traveling. A study showed that 17% of China’s GenYers indicate “playing games on a computer or console” as their favorite pastime.
Source: InSites Consulting youth survey (video games market in China)
Video games market in China was predicted to become the largest in the world by the end of 2016, as reported by Daxue Consulting. Now, the country has overtaken the US to become the world’s largest video-game market, worth nearly $30 billion a year. According to Newzoo’s Global Games Market Report, APAC still dominates, accounting for 47% of the international market. China alone accounts for one-quarter of all global game revenues. According to iResearch, online gaming revenues in China reached $25 billion, up 23.2% from 2015. In 2016, the number of mobile game players totaled 521 million, while the number of PC game players was only 484 million. iResearch’s report shows that mobile gaming surpassed PC gaming last year to inherit the largest market segment in the gaming industry. China’s mobile Internet users climbed to 695 million, showing much stronger growth than the rate of overall web users. While PCs and laptops are still used extensively, especially in workplaces and schools, 95.1 percent of internet users access the web from mobile devices – mainly phones, reported Tech in Asia. Thanks to strengthened networks, it’s easier and quicker than ever to connect with a mobile device. Thanks to these developments, the consumer experience now features a better playing experience. The mobile segment in China has grown more rapidly than expected, reaching $11.9 billion in 2016, up 59.6% from $7.1 billion in 2015, according to the CNG Games Research Center (CNG中新游戏研究).At the forefront of the recent boom is Chinese tech giant Tencent Holdings, which earned two remarkable accolades–the 10th largest company worldwide, and the largest in Asia–in September 2016 after strong mobile games performance in the first half of 2016.
Video Games Market in China: Mobile Games Outperform
According to the classification of the CNG Games Research Center (CNG中新游戏研究), there are three categories of video games in the Chinese market: mobile games (49.50%), PC client games (35.20%), and online games (PC browser games) (11.30%). Client games, including games whose client software must be installed onto gamers’ PCs, such as Multiplayer Online Role-Playing Games (MMORPG), began to slow down in 2016, in line with expectations. Mobile games, however, are growing faster than estimated. Elimination and parkour games (parkour involves movements such as running, jumping, swinging, climbing, vaulting, and rolling while navigating obstacles) were particularly popular on mobile devices in 2016, when, for the first time, mobile gaming took a larger share than PC gaming and accounted for over half of the online gaming market. There has been an explosion in the number of mobile players in the past five years, while the number of PC client gamers remained quite stable (around 450 million).
Reproduced by Daxue Consulting from the CNG Games Research Center (CNG中新游戏研究)’s annual survey on the video games market in China, 2016
The mobile gaming boom has so far produced a number of highly reputed games, enticing more players by day. Thanks to the large PC game user-base and the fast-growing mobile games sector, the video games market in China is still on the rise. However, iResearch holds that the gaming industry urgently needs product innovation, industry integration, and international development to maintain its competitive edge. According to Newzoo’s predictions, China will likely remain the largest gaming market for the foreseeable future, ballooning to $28.9 billion by 2019.
Mobile video games in China have grown tremendously reaching $11.9 billion in 2016, up 59.6% from $7.1 billion in 2015
Government’s Policies Regulate the Market Development
Since 2005, the government has continually published laws and regulations to regulate the video games market. The video games industry is one of the most indispensable parts of the Chinese culture industry, explaining for the Chinese government’s recent surge of interest in gaming. The government has invested a great deal in social construction and set up incentives for innovation within the video games industry so as to bolster the companies’ competitiveness. Despite former government policies to support the video games market in China, nowadays, the Chinese government attempts to regulate the fast-growing market. To quash the production of low-quality and illegal games, for instance, the government references its approval processes and requirements. (Chartboost) According to China’s Ministry of Culture, the pilot reform program begun in 2014 has been a boon for the industry, even if the manufacturers must still comply with strict regulations and ensure that the game won’t promote anything that would harm national unity. Regulatory reform offered foreign companies a great opportunity to build their business in China, as it gave them access to the Chinese video game console market, where products like XBox, Nintendo, and Playstation were quickly injected. However, Pokémon Go, launched in Hong Kong in July 2016, was not granted the same level of access. China does not approve of the release of augmented reality (AR) games, according to the State Administration of Press, Publication, Radio, Film and Television (SAPPRFT).Therefore, in order to adapt to the Chinese market, it is important to stick to their customs, laws, and regulations.
New Trends in the Video Games Market in China
Source: iResearch Global Group, 2016
Tencent and NetEase dominate the video games market in China, with a combined share of 55 percent. Other big players are Youzu (游族网络), ELEX (智明星通), and Perfect World(完美世界). Tencent has overtaken even better known U.S. names such as Activision and Blizzard to become the world’s largest game publisher by revenue. According to The Wall Street Journal, the global video games industry’s biggest player has adopted a domination strategy of acquiring foreign companies or forging strategic alliances with international firms to remain autonomous. Last year, the Chinese Internet giant Tencent bought Supercell, the Finnish maker of the popular mobile game “Clash of Clans” for $10.2 billion from the Japanese group SoftBank. The deal is believed to be the first that values a European digital company at more than $10bn, surpassing both the old-guard video-calling service Skype and music streaming giant Spotify, according to The Telegraph. Tencent also owns Riot Games Inc., the American firm behind the massively popular multiplayer online battle arena (MOBA) game “League of Legends.” Riot games is the organizer of the League of Legends World Championship, which was seen in autumn 2016 by 43 million people, according to the company.
With Tencent dominating the Chinese market, numerous small and medium-sized companies with creative gaming concepts are contending for coveted niches–proof that innovation is key to success in this market. Therefore, it is crucial to stay up-to-date with the latest industry news. According to Johnny Zou, an analyst at IDC Research, “China’s gaming industry will see further growth. While remaining closely involved with the traditional PC and mobile industries, the gaming industry will draw from artificial intelligence, wearables, virtual reality, big data, cloud service and other emerging technologies and use animation, literature, movie & TV, live broadcasting, themed amusement park and other traditional entertainment industries to create more disruptive value.” Among these predictions, Daxue Consulting selected three main trends in China’s video game industry to watch for in 2017.
High-quality mobile games
Japanese-style playing cards of the roleplaying game Onmyoji (阴阳师), which became a hit in 2016
Of the revenue from top-up cards (cash cards netizens use to pay for online games), which generated more than $1.45 million in China every month of 2016, role-playing games (RPG) accounted for 66.8%, followed by trading card games (TCG, also called collectible card games) with 13.5%, as reported by the CNG Games Research Center. Compared with the other types of mobile games, role-playing games are still the major market-driving force. A new mobile role-playing game, Onmyoji (阴阳师) launched in September 2016 by NetEase, became an instant hit, thanks to the unique design of the cards and the game’s traditional Japanese characters. Onmyoji features exquisite graphics and 3D animations set in ancient Japan, location-based services (LBS), allowing players to socialize with nearby users, and popular Japanese voice actors to create an immersive gaming experience. NetEase’s RPG game was extremely successful with young people last year. Onmyoji was one of Facebook’s Top 3 best mobile games of 2016. More Chinese premium mobile games like Onmyoji will likely emerge this year.
Video game-film relationship
Another growing trend in China is the videogame-film connection. Video games based on movies and TV series are becoming more popular in China. As reported by the CNG Games Research Center, the video game adaptations generated $1.29 billion dollars last year, or 10.9% of total global mobile games revenues. This trend involves the concept of IP (Intellectual Property), which companies use to adapt original PC games into mobile games. In the cross–platform game industry, the IP of a lot of original PC games were used by companies to adapt them into mobile games, such as the mobile game A Chinese Ghost Story (新倩女幽魂), adapted from an online game of the same name launched in 2012 by NetEase. In 2016, this mobile game also achieved fame especially among young girls thanks to its product placement in the drama and the movie LOVE O2O (微微一笑很倾城), featuring the young actor Yang Yang（杨洋）and the actress ZhengShuang (郑爽). The campaign drew the attention of new and old gamers to this 4-year-old MMORPG ( the acronym for Massive Multiplayer Online Role-Playing Game). Another example is the American action-fantasy movie Warcraft: The Beginning, based on the Warcraft video games series and novels, which succeeded tremendously in China. The film grossed $433 million worldwide and is the highest-grossing video game adaptation of all time. Warcraft made over $220 million in China alone, representing more than half of its global total box office. After the movie had been released, many gamers in Mainland China started to play this old PC client game again.
“Social gaming” commonly refers to playing online games that allow or require social interaction between players. Social games can be operated on mobile devices and PC. Because of the 14-year-old ban on gaming consoles (2000-2014) in China, players particularly enjoy free social games. In China, traditional social games like card and chess games, allowing users to play with their friends and strangers online, were once very popular but are now on the wane. Chinese social game Happy Farm (开心农场), called FarmVille in the West, was one of these games. The goal was to grow virtual vegetables in a farm and steal vegetables from others. More than social activities, now most players prefer good mobile games with an enhanced gameplay experience, like Clash of Clans. Released in China in 2013 by Supercell, the combat strategy mobile game Clash of Clans (部落战争) was a massive hit. Clash of Clans makes $1,847.31 per minute compared to Candy Crush Saga, also released in 2012, which earns $1,847.01 a minute.
Video Games Market in China: What about consoles?
The console gaming market has suffered severe losses over the past few years, continuously bleeding its market share from 91.71% in 2008 to 65.6% in 2013. But the tide is turning. Not only Sony, Microsoft, and Nintendo would benefit from the lift of the 14-year-old ban on gaming consoles; Chinese indie game developers could, too. While mobile gaming is dominant in China, the console segment has the potential to grow higher and is “a largely untapped source of potential consumers,” according to The Verge. So far, consoles are still a niche. Home consoles make up only 0.50% of total market sales. IDC estimates that console games alone contribute a revenue of US$95.0 million, up 200% year-on-year, and forecasts the number of console game users in China to hit 10.5 million by 2020, or 10 times the current number. Niko Partners predicts that PC console games launched on Steam and TGP (Tencent Games Platform腾讯游戏平台) will prosper in the coming years since many games have already achieved success on Steam, the American online game platform for PC. According to its statistics, the number of Chinese userson Steam surpassed 10 million in 2016.
The evolving video games market in China is also engendering development and innovation. China’s private developer pool is deepens as the country’s economy grows, and the Chinese government can no longer ignore indie game developers. This issue was a major focus during the 2016 China Game Industry Annual Conference (2016年度中国游戏产业年会), which was held on December 14thlast year. IDC forecasts that game exports, especially to the U.S., will continue to rise, as Google finally opened its Developers Platform to Chinese developers on December 8, 2016.