China’s digital games market has seen zero games approved for sale since March 28, 2018 due to ongoing restructuring of regulatory bodies. During the 13th National People’s Congress it was confirmed that the State Administration of Press, Publication, Radio, Film and Television (SAPPRFT), one of two regulatory bodies responsible for game approvals, would be split into multiple parts. TV and Radio is to be handled by the newly formed State Administration of Radio and TV (SART), Films are to be handled by the National Film Bureau, Press and Publication is to be handled by the State Administration of Press and Publication. The National Film Bureau and the State Administration of Press and Publication have been placed under direct control of China’s Publicity Department of the Central Committee (CCPD).
The State Administration of Press and Publication will now handle oversight of digital game approvals in China. This new body is the latest in the evolution of press and publication regulators, taking over from the SAPPRFT which originally took over from GAPP in 2013.
The Ministry of Culture (MOC), which recently merged with the China National Tourism Administration, is the other regulator that needs to approve games for launch, and the MOC’s work has not halted in that time frame. However, since both regulators are required, and the Press and Publication Administration has not issued any approvals in that time, no game has been approved.
Regulators must approve games for sale and issue a license number (ISBN) before the publisher can distribute a game in China. This approval process can be long and usually requires various elements of a game to be edited to comply with content policy. Originally this regulation only covered PC games but mobile games were added in July 2016. During the first 7 months of 2017 there were 5,659 mobile games approved for sale by the SAPPRFT. During the first 7 months of 2018 that number is only 1,931, with all of them being approved within the first 3 months of the year.
Most of the games launched during the first half of the year were approved in 2017 or early 2018. However, with the lack of approvals starting from March 28th we do expect to see a reduction in new game launches during the second half of the year, as game publishers wait for approvals to ramp up again.
In addition to the suspension on game approvals, regulators have been clamping down on online and game content. The MOC has investigated a number of game publishers and distributors and issued fines to those who are violating game publishing laws. There is also the ongoing block on South Korean game approvals, which is seemingly due to tensions between the two countries escalating after a THAAD missile defense system was greenlit to be built in partnership with the US. South Korean game publishers such as Nexon and Netmarble have been unable to receive licenses to launch their games in China since and even Tencent has been unable to monetise PUBG Mobile in China due to lack of approval.
Small and large companies are impacted. In early August we thought the wait was over, because Tencent launched Monster Hunter World on WeGame, presumably with a license. However, five days after launch Tencent was ordered to take down the game and cease sales. The game was removed as Tencent failed to comply with regulations surrounding content and game approval.
Despite many regulatory hurdles, China’s digital games market still saw growth in the first half of 2018, all be it at a slower rate than the prior year. Legacy games continue to perform well, and game developers are increasingly looking to new segments to expand the digital games market in China. Many game developers have found success by developing titles aimed at female gamers, Anime/Comics fans and first-time gamers through WeChat’s Mini Game platform. Core gamers are continuing to be served by new titles that focus on high end graphics and in depth gameplay mechanics. Niko Partners expects total China games revenue to increase 15% from 2017 to 2018. We monitor the market every day, and will update readers on developments.