During the coronavirus lockdown in China, millions of Chinese citizens, quarantined in their homes, went online for some gaming distraction. Now the lockdown has ended but it’s clear that the market for Vegas casino gaming entertainment is still there. Gaming operators around the world are examining ways to take advantage of the new interest in gaming in China.
Gaming in China
Over the Chinese New Year in February 2020, at the height of the lockdown in China, Honor of Kings, a popular Chinese game that is available for online play on the Douyu streaming platform, had over 60 million streams. That compares to 30 million streams during that same period in 2019. The Chinese Tech giant Tencent saw its gaming services grow during the outbreak even as its WeChat Pay service declined sharply.
Even before the lockdown, the gaming industry in China had been thriving and was poised to expand. China is currently the world’s second largest gaming market, just behind the U.S. Gaming revenue in China in 2019 was recorded to be U.S. $36.5 billion and market research firm Newzoo has projected that by 2020 it will capture the position as the biggest gaming market in the world.
These numbers are drawing gaming international gaming companies and operators to look at China as their next big market to conquer.
China’s gaming market is enormous and it’s continuing to grow at a phenomenal rate. The legalities of online gaming in China, however, are complicated with laws changing frequently. The gaming industry in China is subject to strict rules and oversight.
Gaming in China is currently governed by 2018 legislation that places approval of games available to Chinese citizens in the hands of state regulators who must approve the game’s content. Once approved, the regulator issues a license that makes it legal to sell and play the game in China. Regulators will not license games that are deemed to have “inappropriate content” such as sexual content and excessive violence. For instance, 2 years ago, game designers for the popular Monster Hunter: World were denied a license to market their game in China because, according to their estimation, it was too violent.
The government ministry responsible for regulating online games in China is the Central Propaganda Department. Prior to 2018, licensing new games had been under the auspices of the State Administration of Radio, Film and Television (SARFT) and the Ministry of Culture. However, the Central Committee was displeased that too many games were being licensed by SARFT and the Ministry of Culture who were licensing an average of 641 games per month. After the 2018 switch, the new Propaganda Department started licensing an average of just 131 games every month.
The new regulators are also holding back on licensing foreign titles – only 185 games submitted by foreign publishers were licensed in 2019.
Another hurdle that gaming developers must pass in China will involve getting listed in Chinese app stores. From July 2020, developers will be required to obtain an International Standard Book Number (ISBN) in order to list their game in app stores in China. The ISBN will be granted after the game has been approved by multiple agencies including the Copyright Protection Center of China (CPCC), the Ministry of Industry and Information Technology (MIIT) and the SARFT.
The government of China has placed a great deal of emphasis on limiting the amount of time that children play video games. The Ministry of Education released a plan in 2018 that introduces playing time guidelines and age restriction limitations for video games. The Ministry says that they want to avoid poor health, game addiction and myopia that, according to them, gaming among youngsters can cause.
The General Administration of Press and Publication (GAPP) is monitoring children’s gaming habits by requiring spending limits for online gamers under the age of 18, real-name registration and a curfew. Children between the ages of 8 to 16 can add only RMB 200 (U.S. $28.33) into an online account while those aged 16 – 18 may add RMB 7.06 every month (U.S. $56.67). Individuals under the age of 18 are limited to 1.5 hours of weekday online play and 3 hours per day on weekends and public holidays. Under 18s are banned from playing games online between the hours of 22:00 and 8:00.
Foreign developers and investors must consider how to work around the regulations regarding payment methods in China for foreign platforms. Digital payment systems such as WeChat and Alipay are the most commonly used payment platforms in China. Chinese citizens don’t have access to international credit cards, nor can they facilitate transactions which are charged in a foreign currency. \since ISBNs are not directly issued to foreign-invested enterprises (FIEs), foreign developers will need to partner with a Chinese payment platform that will publish and register the games on behalf of the developer in order to enter the Chinese market.
For example, Nintendo, a Japanese gaming company, distributes Nintendo games in China via a partnership with Tencent, the Chinese gaming and technology company. The same arrangement is enjoyed by PUBG Corp which is a subsidiary of the Bluehold South Korean video game company. Its game PlayUnknown’s Battleground is distributed via Tencent.
Foreign game developers may find it beneficial to establish a Wholly Foreign Owned Enterprise (WFOE) and partner with a domestic entity so that they can employ staff, market and collect payments in China.
Despite the difficulties, overcoming the hurdles to enter the Chinese gaming market is increasingly viewed as a worthwhile endeavor by foreign game developers. The potential is enormous and the future seems sunny.