China’s Video Game Industry: Exploding into Life?

The video games industry in China and throughout the world has seen significant growth over the last two decades. It is interesting to see how China, a country that banned consoles between 2000 and 2014, has managed the increasing need for software engineering and video game marketing.

A Country of Gamers?

In 2014, the Chinese video games market became the biggest in the world (more information here), overtaking the USA. There were over 500 million internet users and Smartphone users in 2014. Although personal computers (PCs) are still the main platform for gaming, mobile gaming is becoming increasingly popular.

Smartphone users spend 43% of their overall time on mobile gaming. There are 120 million Chinese mobile gamers and the pool of players is growing at an alarming rate: 349%! As of 2015, Tencent is 2nd in computer and video game publishing in terms of revenue with 8.75 billion USD, behind Sony (11 billion USD) and in front of Microsoft (8.21 billion USD). Tencent, a Chinese company, owns some of the most popular tech services and apps in China, including WeChat (most used messaging app in the world), and some of the largest Chinese gaming platforms.

The target market for PC video games are hardcore gamers who play only one or two games but are completely addicted, racking up many hours a day. Consequently, the most popular games on this platform have become more competitive, and tournaments are organized all over the world with cash prizes regularly exceeding 1 million USD.

Mobile gaming, in contrast to PC gaming which has a strong history in China, does not have the same target market: mobile gamers are generally casual players who play multiple games. Game console companies share this target market as well, aiming towards customers who play regularly, and play several different games. Mobile gamers are the likeliest to transfer to console gaming.

mobile games china


The Rebirth of Console Gaming

China banned youths from console gaming in 2000 in order to minimize video gaming addiction. In 2014, the Shanghai Free Trade Zone re-opened the market to console gaming. However, as China becomes so focused on PC and mobile gaming, console companies are facing difficulties catching up and filling the gap as a result of being barred for more than a decade in the Chinese video game market.

In 2013, for example, Microsoft and another Chinese tech company, Baishitong, raised 79 million RMB to start a joint venture. Sony followed by working with Dongfangmingzhu to promote its PS4 in the Middle Kingdom.

Most recent data explains that the demand for console games in 2017 is expected to be 20 million units in China, and the expected penetration rate is likely to be around 20% in 2017 – in comparison, market penetration was 51% in the US in 2014. The console market in China may be reborn from the ashes if it’s able to adapt to different market conditions in China.

Some Chinese consumers still tend to smuggle and replicate video games. Furthermore, there are still many difficulties for foreign studios to be authorized to sell their gaming products in China due to government censorship. Additionally, the lack of hardcore users and console culture continues to be a significant issue.

Nevertheless, console video game companies may find a solution by providing their customers with additional services such as OTT (Over The Top) a term used for the delivery of Video/TV content via the internet. Both PS4 and Xbox One are not only console but also media centres on which customers can surf the web, and watch TV or use any OTT services. Microsoft, for example, based its marketing strategy for the Xbox One around the idea of a media centre, while Sony opted for a more hardcore gaming attitude with its “This is for the gamers” campaign.

In line with this, data shows that the OTT market had a growth ratio of 314% in 2014. Digital OTT  reached 225 million users, and digital TV reached 51.7% of TV users. In contrast to PC gaming, the increase in digital OTT and TV users means there will be fewer issues in regards to running games with high graphic requirements as it will all be streamed from a distant server. As games will require Internet connectivity, game smuggling and other associated issues will decrease. Moreover, we can expect many new technologies to enhance the interest of buyers in the near future, such as the eye tracking application on video games.

But will China’s Internet infrastructure be fast and strong enough to handle all this extra demand for data?

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