The National Press and Publication Administration (NPPA), the regulatory body governing China’s video game licensing, announced a batch of new licenses, called ISBNs, for 45 domestic games on April 11, 2022. Companies pursuing China’s games market have waited 263 long days since the last batch of ISBNs, which was July 22, 2021. The news of the new batch allows game publishers and developers to breathe a sigh of relief, as the only games legally operating in China now are those that were granted ISBNs prior to July 22, 2021.
Niko Partners notes that all games published on official platforms in mainland China must obtain a license prior to launch. In addition, new licenses are announced in batches, and batches are divided into domestically developed or import games.
April 11’s batch includes 45 domestic games: 39 mobile games, 5 PC games, and 1 Nintendo Switch game. We note that this is smaller than the typical previous domestic batch size of 80 to 90 games, however it is still possible for a second domestic batch to be announced soon that could bring the total to about the same level as historical announcements. Key games that received a license in the current batch include: JX 3 Origin (Seasun / Kingsoft), Flash Party (XD Network), Dream of Voyage (37 Interactive), Life Party (Lilith Games), Clocker (Gamera Game), Tower Hunter: Erza’s Trial (G-Bits), Junior Three Kingdoms: Pocket Battle (Yoozoo) and My Time at Sandrock (Pathea Games). The top genres by number of approvals were Casual (10), Simulation (7), Action (6), Puzzle (5), RPG (5), and Strategy (5).
We are still waiting for import games to be approved
Critically, this batch is domestic games only – the last batch of import games was published on June 28, 2021. Niko Partners tracks all licenses carefully, and in 2018 when a 9-month freeze was lifted, the domestic batch was announced 3 months before the first import batch. We are hopeful that the next batch of import titles will be announced sooner than 3 months from now. The full breakdown of ISBNs issued today, along with a history of ISBNs going back to 2009, can be found in Niko’s China Games Market Monthly Database, which provides new data monthly regarding ISBNs, financial transactions, games rankings, games in beta, and more.
For more information on regulations and game approval requirements please refer to Niko’s China Game Regulations and China Business reports, as all games must adhere to the regulations and pass the approval process prior to launch. The regulations report is the central resource for understanding regulations, agencies and administrators that impact the industry. The business report details the game approval process and requirements for launching a game in China.
Approvals restarted because concerns regarding non-compliance have been addressed
Notably the 263-day freeze on new video game licenses was unannounced by the NPPA, unlike in 2018 when it was (and, coincidentally, that freeze was 265 days long). Niko’s research shows that the 2021-22 freeze was initiated due to a lack of compliance across the industry in regard to protection of minors and game content regulations. This freeze was different from the one in 2018, as games could still be submitted for approval this time around and it was more about enforcement and strengthening of current regulations, rather than broad and sweeping reform. Niko Partners notes that over 5,000 game companies have now connected to the national anti-addiction system, numerous companies have made changes to in game content and non-compliant companies have been investigated and fined by the relevant regulators. We believe that one possible reason that ISBN approvals resumed is because these concerns have been adequately addressed.
Large companies were able to weather the storm over the past year
The recent freeze was troubling and worrisome for all companies in China’s games industry, especially in light of other key global events happening now. The current massive COVID-19 lockdown in Shanghai directly impacts games companies headquartered there because people cannot go to work, even though those who are locked down are playing games at a higher rate than ever, and importantly the protracted war in Ukraine is adding stress on global markets overall. Game companies in Shanghai have also been sending care packages to employees who are stuck at home and ill-supplied during the lockdown.
Large game companies who had been granted licenses prior to mid 2021 were able to wait out the long months of no new licenses by relying on both new content updates for legacy titles and launching previously licensed new titles into the market. Niko Partners notes that companies like Tencent and NetEase were able to launch multiple hit games during the freeze, such as Return to Empire, Harry Potter: Magic Awakened and League of Legends: Wild Rift, as the ISBNs for those games were granted prior to the freeze.
We also continued to see an acceleration of international expansion efforts by the domestic giants, but we note that the growth was concomitant with, not correlated to, the freeze. Small and medium sized companies that are reliant on new licenses faced difficulties during the period, with nearly 1,000 game related companies shutting down in the past 8 months. Small companies have been looking for investment or to be acquired to weather the storm.
The resumption of game approvals is a positive sign for China’s video game market and could indicate that more titles than expected might launch in the second half of the year. We forecast 500-700 games to be approved in 2022. Enforcement and compliance have become a major part of the NPPA’s role over the past couple of years and we continue to see strengthening of policies and a crackdown on loopholes. Fortunately, the average revenue per paying user (ARPPU) has also risen in this time. This will be covered in our China PC Games Market and China Mobile Games Market reports, releasing in May 2022, along with a current market model and 5-year forecast, along with results of gamers surveys, interviews, trends analysis, and M&A activity.