Computer and Video Games (China Market)

• Computer and Video Games (Global Market)

2023

State imposes spending and content restrictions on online games as part of fight against gaming addiction

In December 2023, China introduced a series of new measures to limit spending and content in online games. In recent years, Beijing has sought to combat gambling addiction.

On Dec. 22, Beijing's top gaming industry regulator released draft rules aimed at cracking down on practices that encourage players to spend more money and time online. Among other things, they include a ban on rewards for frequent game entries, forced player duels and a vague ban on any content deemed to violate state secrets.

China's video game market up 13% to 303 billion yuan in a year

Revenue from the sale of video games in China in 2023 reached 303 billion yuan ($42.48 billion at the exchange rate as of December 18, 2023). This corresponds to an increase of about 13% compared to the previous year, as stated in a study by the State Association of the Gaming Industry of the PRC (CGIGC), the results of which were released on December 15, 2023.

The report notes that revenue from sales of games in the domestic market China in 2023 for the first time in history exceeded 300 billion yuan ($42.06 billion). At the same time, the number of Chinese gamers rose by 0.61% on an annualized basis - to a record 668 million, which is more than the entire population. North America

Video game revenue grows in China

The return to growth is a major turning point for the world's largest gaming market. The decline in video game revenue in China began in 2022 amid efforts by local authorities to combat gaming addiction. It is reported that an increase in revenue from games created in China was recorded: in 2023, it reached about 256 billion yuan ($35.89 billion), which is 15% more than the result for the previous year. At the same time, revenues from Chinese games in foreign markets decreased on an annualized basis by 5.65%, reaching $16.3 billion.

The CGIGC study also states that anime-style games from China, such as Genshin Impact (developed by miHoYo Limited), are becoming increasingly popular, contributing to revenue growth. Sales of anime games for smartphones and tablets jumped 31% in 2023, reaching 31 billion yuan (approximately $4.35 billion). The recovery of China's gaming industry has a positive impact on the financial performance of local industry participants. Among them are named Tencent Corporation and NetEase, known for its popular game project Egg Party.^[1]

The authorities of the Russian Federation and China agreed to support the entry of Russian video games into the Chinese market

In mid-June 2023, information appeared that the authorities of the Russian Federation and the PRC agreed to support the entry of Russian video games into the Chinese market. In particular, the Storns managed to agree on the allocation of a quota for their projects within the framework of the accelerated licensing scheme.

But market representatives are concerned that only large development companies of the Russian Federation will receive advantages. Russian gaming platforms, like VK Play, want to attract Chinese gaming projects to the Russian market, Kommersant writes.

The authorities of Russia and China agreed to support the entry of Russian video games into the Chinese market

According to a source close to the Government of the Russian Federation, Russia and China have already agreed to support Russian video games in the Chinese market. The interlocutor of the publication in the industry clarified that the Ministry of Economy is dealing with the issue. The Ministry of Economy reported that, together with Ministry of Digital Development, by mid-June 2023, "they are working on a range of issues aimed at developing the digital economy and supporting developers of creative industries, including computer games, including in a number of international areas."

Game developers back in March 2023 asked the Russian government to simplify the procedure for accessing the Chinese market for Russian projects. According to Kommersant, the number of quotas for Russian projects has already been determined, where development companies will be able to obtain licenses on the PRC market according to accelerated procedures. The selection is carried out by the Association of Professionals in the Operating and Game Development Industry, headed by VK Play Director Alexander Mikheev.

Some Russian gaming projects already have licenses in China, such as Pixonic, which was part of My Games. Pixonic's partner in China in 2018 was the publisher of iDreamSky. In order to get a license in the Chinese market, Pixonic had to wait about six years.^[2]

The Russian government will help Russian developers release games in China

The Ministry of Digital Development, Communications and Mass Media of the Russian Federation will help Russian developers release games in China. The head of the department Maksut Shadayev said this on February 15, 2023. Read more here.

2022

Market decline by 10.3% to $39.7 billion

In 2022, sales of games China in fell by 10.3% compared to 2021, to $39.7 billion. This is the first market drop since 2003, the Digital Publishing Association said China in mid-February 2023.

According to her, the industry is under significant pressure, and several factors play a role here. From restrictions due to the COVID-19 pandemic, to strong competition from foreign companies in the Chinese video game market, reduced user spending, difficulties in attracting audiences and more. According to analysts, the fall of the world's largest gaming market suggests that revenues in the global market will also decline. Since the end of 2019, the Chinese authorities have introduced a number of restrictions on the video game game market, which has an ideological orientation, and limiting the playing time of underage users.

Chinese video game market falls for first time in years

Video game sales in the market totaled $39 billion in 2022, down 10.33% from 2021, according to a report released by the Digital Publishing Association of China, according to an industry report by the Chinese association. The total number of users decreased to 664 million, which is 0.33% less than in 2021. Mobile games represented 70% of the Chinese market in 2022. And their profits decreased by 14.4% to $28.4 billion. In 2022, Chinese-made games showed another successful year, raising $17.3 billion in foreign sales. While that was down 3.7% from 2021, the drop was far less significant than sales in China's domestic market.

In China, according to a report by the Digital Publishing Association, men 51% and women 49% play video games with the same interest. Gamers have the most under-35s, with under-25s making up 36.7% of total gamers and 26 to 35-year-olds making up 41.6%.

Amid upheaval in the Chinese gaming industry in 2022, regulators stopped issuing permits for new games in late 2022 for months, according to the South China Morning Post. The process resumed only in mid-January 2023, but now it takes longer and costs all development companies more.

China has a reputation for making lucrative, addictive mobile games, but its gaming giants are now looking to create big-budget global hits that will stand the test of time, according to the South China Morning Post. The world's largest gaming company, Tencent, is developing an AAA-class console game at its Lightspeed branch in Los Angeles. Tencent's closest competitor in the form of NetEase is also busy developing and launching its products on foreign platforms.^[3]

In China, for the first time in a year and a half, licenses were issued for the release of foreign games

The National Press and Publications Administration of China (NPPA), which regulates the local gaming market, has granted a number of licenses required to publish projects of foreign companies in the country. This became known on December 30, 2022.

In total, regulators allowed 44 projects to be released in the country, including 7 games from developers from South Korea. For example, the list includes the competitive shooter Valorant from Riot Games and MOBA Pokemon Unite from The Pokemon Company.

Any foreign game, before it becomes available to the country's more than 700 million players across all platforms, must be "localised" by a Chinese company and vetted by Beijing's censors.

The last licenses in China were issued in the summer of 2021, and in the fall it became known that the registration of new ones was frozen. The situation caused the closure of a large number of small studios and the fall in the capitalization of large companies.

Together with the issuance of 44 licenses, the authorities allowed the release of 84 games created by local companies. This led to an increase in the value of shares in Krafton, Kakao Games, Tencent, NetEase, ByteDance and other studios producing games in the Chinese market^[4], for the^[5].

In total, in 2022, the regulator issued 462 licenses for domestic video games against 755 in 2021^[6] to^[7].

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