China was a hot topic in Mary Meeker’s annual Internet Trend Report for 2018. For the first time ever, there was an entire section (24 slides) dedicated specifically to the China internet market – indicative of just how important the China market has become. The section covers internet usage, mobile usage, mobile gaming, time spent on entertainment, and more. And you won’t be surprised to learn that digital gaming is at the heart of the growth in internet usage. Here is Niko Partners’ analysis of the gaming related trends covered in the China section of Mary Meeker’s highly regarded report:
- China’s accelerating mobile internet usage means more mobile gamers
Data published by the China Internet Network Information Center (CNNIC) states that the number of mobile internet users in China has reached 753 million at the end of 2017. More impressive is that the number of smartphone users in China is now 956.8 million, representing 68.9% of the current population of more than 1.4 billion people. Think about that for a minute: 956.8 million people. By 2022 more than 200 million new smartphone owners will enter the market with the total number reaching 1.17 billion, representing 81.6% of the population.
A total of 158 million new mobile gamers will enter the market between 2017 and 2022 due to the increase in smartphone users, continued investment in mobile infrastructure, a decline in mobile data charges and a surge in Chinese youth owning their own smartphones. The next wave of mobile gamers will begin their mobile gaming experience through initiatives such as Tencent’s Mini Games, popular IP-based games and PC to mobile game adaptations. The increase of games targeting female gamers, younger gamers and games for education will also be drivers.
- China is the largest games market in the world
The Internet Trend Report confirmed that China is the largest games market in the world, echoing our analysis that released earlier this year. According to Niko Partners’ 2018 research, the China PC + mobile games market reached $27.7 billion in domestic revenue in 2017 and will surpass $42 billion by the end of 2022, primarily driven by mobile gaming and esports. The number of gamers in China is also set to increase from 603 million in 2017 to 768 million in 2022.
Domestic mobile games revenue is set to grow from $12.13 billion in 2017 to $24.67 billion by the end of 2022, essentially doubling the market size. New genres, esports, IP-based games, female gamers, mini games and an increase in the number of mobile gamers are just a few factors driving growth in the mobile games market.
China is by far the world’s largest games market and the single most important market for both mobile and PC games, and it’s growing faster than expected. Global game companies, hardware providers, and others must take the time to understand the Chinese market and Chinese gamer’s motivations, behavior, demands, and economic reality in order to build games and products that will soar to the top of the charts.
- Mobile gaming is being driven by non-MMORPGs
While the mobile games market was previously driven by traditional genres such as MMORPGs and casual games, the China mobile games market has seen a shift towards new genres such as MOBA, FPS and battle royale. The competitive elements in these genres has led to a number of mobile gamers becoming engrossed in games within these categories and has allowed for a mobile esports ecosystem to flourish. Examples of popular games within these genres include Honor of Kings and PUBG Mobile from Tencent.
Honor of Kings, a 5v5 MOBA, has over 80 million daily active users in China. The game is extremely successful in China due to its ability to adapt and tailor a traditional MOBA experience to mobile devices, promote to millions of users via social media and embrace a professional and amateur esports scene. PUBG Mobile, a battle royale game, has been able to adapt traditional battle royale gameplay to over 550 million mobile gamers in China. By bringing battle royale to mobile, Tencent have been able to reach more users in China than the PC version has globally.
- Gaming time is increasing in China
Hillhouse Capital authored the China slides in Meeker’s report, and their data shows that the amount of time spent on gaming has increased from 260 million hours per day in 2016 to 416 million hours per day in 2018, up 22%. Gaming accounts for 13% of daily time spent across all mobile entertainment segments such as video, news, audio, reading and social networking. Game time comes in third behind social networking time and video time.
As smartphone penetration rises and mobile data charges fall, and more core games are developed for mobile devices, Niko Partners believes that mobile internet use will climb and that 13% will reflect quite large absolute value – and could even climb higher than 13%.
- There will be more investment in China
Other subjects of interest in the China section of Meeker’s report are: ecommerce, online payments, on-demand transportation, online video and retail innovation technologies Importantly, as use of each of those sectors rises, the number of mobile gamers also rises because more and more people are accustomed to dependence and engagement with their mobile device and using mobile gaming as digital entertainment during downtime. There is also synergy between mobile gaming and some of these segments such as live streaming.
Live streaming is a huge factor behind the discoverability of games and a key driver of engagement within these games. The game live streaming market in China has grown significantly over the past few years as millions tune in to watch their favorite anchors play, compete and commentate over the latest titles. Live streaming platforms such as Twitch and Youtube are not accessible in China and this has led to homegrown platforms dominating the scene. The competition between these platforms is tough with all of them willing to spend top dollar to secure popular streamers, esports tournaments and special events.