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In September China finally lifted a 13-year ban on video game consoles and in doing so opened up a new chapter in the country’s gaming history. Nintendo, Sony and Microsoft will now be clamouring to tap into a huge potential market that has been manufacturing the big three’s consoles but not using them. Consoles were originally banned in 2000 because authorities were concerned about their effect on mental health of young Chinese, but online gaming on PCs and mobile gaming have filled the gap in years since. So what makes up the current and past gaming trends in China?
The landscape of China’s online gaming has gradually shifted in recent years. According to a report by Niko Partners on the Asian games market, MMOGs (Massively Multiplayer Online Games) and free, casual, browser-based games used to make up the overwhelming majority of the online action. But now “we have MMOGs, and within ‘browser-based games’ we have 1) casual games played on casual portals sometimes for free, 2) webgames that are not very casual in nature, generate fees in the virtual economy, and compete against MMOGs, and 3) social games distributed via social networking sites. In addition we have games from each of those segments played on mobile devices as well as on PCs.” Developers of new games will have to make sure to incorporate this move towards more social gaming and navigate the treacherous terrain of monetizing their products in a market where free-to-play games are so popular.
In 2013, 288 million people played mobile games in mainland China. It was the fastest-growing segment of the Chinese market in 2012 and netted the economy around $750 million in revenue. It is estimated to grow to $1.2 million this year according to Bloomberg. The market has seen a dramatic shift from the stereotype of male-dominated internet cafes full of MMOG to a more balanced market where people of all ages and backgrounds are embracing a variety of games. The country seems to be turning away from cafes to office and mobile gaming, a trend that is likely to continue as the middle class continues to grow.
Gambling is one trend that can only grow from strength to strength in the future. Currently mainland China outlaws gambling and the former Portuguese colony of Macau, the “Monte Carlo of the Orient”, is the only Chinese territory where gambling is legal. Needless to say, it can’t keep up demand, meaning more and more of the surrounding countries are becoming gambling havens. According to PricewaterhouseCoopers report on global gambling, the Asia-Pacific casino gaming market will be worth $80 billion ($34 billion in 2010) and Asia-Pacific will bypass the U.S. as the world’s largest regional casino gaming market in 2013. In Macau, the tourists outnumber residents by 54 to 1. If China doesn’t want to risk losing a great chunk of revenue to neighbouring nations, they’ll have to consider lifting the mainland ban. At the moment, online casino gambling is also illegal.
Given that the Chinese market has been without consoles for the last 13 years, it could be that consumers pounce on new hardware as soon as it’s released; or, conversely, they’re suspicious of it and sales flop. The most successful business model in the Chinese video game market is somewhat paradoxically free games – EA and Sony Online have generated millions of dollars in revenue from free-to-play titles. As Edward Williams of BMO Capital Markets has commented: “The Chinese consumer is not geared to the habit of ‘I go to the store, spend X dollars to acquire this game, then go home and play it all night long.’ That creates some challenges for [publishers].” Given the size of the economy and the relative skillsets of the population, the question remains whether China will begin to dominate the global console market and resist U.S. imports if the Chinese appetite for consoles takes off.