China should be an enticing market for any games company.
Not only does it boast the biggest population of any nation state on Earth – with a whopping 1.4bn people – research firm Newzoo claims that 446.3m of that figure play games. Meanwhile, 157m spend money on games. Newzoo estimated that a huge $22.2bn would be spent on video games in 2015 by Chinese consumers, a rise of 23 per cent year-on-year.
Though the percentage of players who spend money on games is reasonable low for the Asia Pacific region – 35 per cent compared to a regional average of 40 per cent – the average spend per player is much higher. Chinese gamers on average spend $141.38 per year; the average for Asia Pacific is $114.77.
But it's a busy sector.
The Chinese games market is almost collapsing under its own weight,” NetEase China's overseas business boss Tom van Dam says. Every release aims to be a blockbuster. The resources needed to compete are enormous as the few companies that rule the roost have the capacity to take up every available piece of exposure across all of marketing and distribution.
Competition in China is intense, and innovation and style struggle to get a voice – with a few notable exceptions - against a strong flow of more tried and tested crowd-pleasers with more familiar styles and systems.
Estimated amount of Chinese comsumer games spending in 2015, according to Newzoo
Once successful though, a game is visible everywhere and can quickly reach cult status among fans.”
CraftQin – editor of Chinese games site IndieNova – says the market has been through a tough period.
We were faced with so many daunting challenges in China, such as rampant piracy and the console ban, which saw our industry go through a dark middle age.
The Chinese games industry's development has been very imbalanced. Many studios have switched to mobile and online games with the titles they make becoming more homogenous. The success of a game depends on the investment in promotion and distribution instead of the quality.”
Though the market is dominated by giants, publisher Oasis' business development manager Martho Ghariani says there has been an indie boom in China.
More small indie studios are appearing with games that shine through their originality. Services like Steam mean Chinese consumers can find these titles, fall in love with and, for some of them, use as inspiration for their own game design. Chinese gamers are amazingly international in their playing preferences.”
What is popular?
Given that Western companies were effectively locked out of China due to the region's ban on the sale of foreign consoles, taking a look at the Chinese games market shows a huge number of franchises that most of us will not recognise.
So what kinds of games are popular in the region?
MMOs do well here because of their natural long lifespan and a monetisation model that slips right into the Chinese mindset,” NetEase's Tom van Dam explains. Plus, games with social elements tend to do better in China, so it follows that the games that are social at their core will be very popular.
RPGs – without the MMO part – were popular but are losing ground to strategy and sim titles.
That rise in strategy games is also coming at the cost of casual; year-on-year we're seeing a downward trend in match-three titles as a more hardcore audience is drawn to mobile strategy games for longer stretches of play time.”
The editor of Chinese games website IndieNova, CraftQin, adds: Mobile and online games are still most popular in China. However, those titleshave their own problems, and those factors result in the low competition ability, limiting the further development of those games.”
What is up and coming?
Both mobile and PC are big in China, but they are also saturated, with Western companies struggling to make a dent in the territory. But other areas are emerging in the region which can be exploited by Western firms.
VR is hotly pursued, with many Chinese-made VR, mobile phone-based, cheap headsets widely available,” NetEase's Tom van Dam says. Like the West, it's a very popular topic and a rapidly burgeoning scene at the forefront of development and investment. With that, however, come the same risks as in the West; the market is perhaps not quite large enough yet and the sizeable investment into creating and marketing a great VR game may not pay off.”
Meanwhile, Oasis' business development manager Martho Ghariani says that console is an area worth investigating.
We look very much forward to the console market, which is just starting to gain pace here in China,” he tells MCV.
Why have western consoles failed to make a mark in China?
For years, the sale of foreign games consoles was prohibited within China.
That was until 2014, when the government temporarily lifted these restrictions, with console manufacturers able to build consoles within Shanghai's free trade zone for sale in China.
This was obviously good news for console powerhouses like Sony and Microsoft, who released PS4 and Xbox One in the region shortly after.
The ban was lifted entirely in 2015, but by this point it was clear that PS4 and Xbox One had not made the mark that Sony and Microsoft had intended. A report from Niko Partners described the hardware's performance as ‘disappointing' and said that they would be lucky to reach 550,000 units between them by the end of 2015.
PlayStation CEO Andrew House partially blamed this on censorship: China has a famously well-controlled media. But this isn't the only reason for the poor performance of the PS4 and Xbox One.
With the ban only lifting last year, Chinese gamers have missed out on two generations, during which gaming in China took off in a big way on other mediums,” NetEase China's overseas business boss Tom van Dam explains.
The financial aspects of console ownership just don't work for Chinese consumers either. Now that they're finally available, consoles cost a lot more than they do in the West and by default only have premium titles, which are bound to fail in a completely free-to-play market. People here barely invest in desktop computers; if you have the money you will be far more likely to invest in a better phone that you