Over the next three years, the international games market will pass US$100 billion, and is expected to be reaching US$102.9 billion in 2017 according to some reports. Annual growth is taking place at the high-speed of +8.1%. The expansion is essentially attributed to the development of the Asian markets coupled with the rising mobile market. China is predicted to overtake the US to become the world’s biggest video game market next year. In 2017, the scale of the market is expected to reach US$4.84 billion.
Until last year, video game consoles and games were banned from entering the Chinese market. Since 2014 regulations have been cut down offering the possibility, for foreign companies to produce and sell video game consoles and games in China under the condition of passing the Chinese content review process of the administration and foreign companies are required to partner with a Chinese company operating in the foreign-trade zone. While most local companies are focusing on developing mobile video games, some others are still making sure they are ready to compete.
Console game in China facing a new market dynamic
Video games multinationals leaders have grabbed the opportunity revealing different strategies to pierce the large and diversified Chinese market. The three major console manufacturers Microsoft, Sony, and Nintendo announced plans reflecting their heavy interest in entering the Chinese market. Microsoft formed a joint venture with the Chinese company BesTV investing $237 million ends of 2013. The new Xbox One was released in 37 Chinese cities and 4,000 retail sites last year in China. The Japanese company, Sony also joined the market, competing directly. Two joint ventures were formed with Shanghai Oriental Pearl in order to focus on console hardware and on software separately and are preparing to sell PlayStation 4 video game in China. Nintendo opted for a more targeted approach towards China; new devices more adapted to the emerging market will be developed during this year to make a noticeable entry. Regulations are currently being analysed closely to a probable release of “iQue player”. The CEO of Nintendo declared, “We want to make new things, with new thinking rather than a cheaper version of what we currently have, the product and price balance must be made from scratch.”
However foreign companies aren’t the only companies with ambitious plans. A joint venture between ZTE, a Chinese telecommunication equipment supplier and a Chinese video game company The9 Ltd. are planning to release a Chinese gaming micro-console called “FunBox”. Android and Huawei will be sharing the market too. The Android console and a controller will have a price advantage since it is half the one of the Xbox One and the upcoming PlayStation 4. Huawei recently presented its new console, called the ‘Tron”, that is scheduled to be released during the summer. Its price will be about the same as Android’s. At a longer term, the Chinese electronics makers TCL will be launching their own video game console too.
A lucrative market for console games in China
Video game console market in China will result from the huge confrontation of the world’s most successful console multinational and local companies. Microsoft, Sony, Nintendo, Huawei, Android and the local companies ZTE corp., The9 Ltd and TCL will all be entering and position themselves over the same market. This desire to capture a large market share in China comes from the idea that a successful launch in the console market could bring more Chinese buyers to pick up the company’s phones, tablets and software, at the same time and would enable to build a lucrative ecosystem in the most populous country on Earth at a long-term. By becoming the main platform for China, developers will be entangled to pass through the service before launching a new game representing a great source of income to the platform. Conviviality and experience of users should be analyzed carefully in China, but most of all game platform service must focus on the service they provide to independent stores for after sales service and support for the utilisation of the product. A strong customer presence can restrain the habit of cracking games and bring customers to purchase officially with authorized resellers. Up to now, the entry of console games in China’s market didn’t generate huge sales. For example, only 0,1 million units of Xbox were ordered in China. This is explained by the very high price of the devices that must be coupled with the purchase of the actual games sold around $65 in China, those amounts are rarely spent as the game can be found for free online. What explains better the poor sales performance of consoles in China is in 2012 more than 4 million video game consoles were sold despite the Chinese ban.
The Chinese console game: OTT
In China, people prefer keeping previous versions of console games going with endless amounts of cracked games available at a very low price than purchasing the expensive latest console version and its games. To address this trend, Alibaba, China’s biggest online commerce company has invested $10 million in another kind of product: the OTT TV box. These are small devices which connect to a TV enabling to expand its functions. It would enable to go online, watch in HD and play games from a cloud, all from the TV set. Alibaba chose OUYA to supply inexpensive consoles powered by Android’s latest technologies, one of the most popular operating systems in China.
The adaptation of console video games in the Chinese market throughout OTTs is a great opportunity that could trigger most households to purchases becoming a product with mass consumption. However its growth may be significantly slowed down since those devices require home high-speed Internet connection of 30 Megabits per second, but 9 Megabits per second is the average in China’s provincial cities.
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