Niko Partners attended the 17th ChinaJoy digital entertainment expo and conference in Shanghai this year. 2019 was a record year for attendance with 364,700 entries during the 4-day event, over 10,000 more than last year. Niko Partners analyst Darang S. Candra gave a speech entitled ‘Global Esports: The Way to the Mass Market’ at the conference, presenting our view and understanding of the global esports market. We also attended the exhibition show floor where the latest games, services, hardware, and technology were on display. We identified six key trends at this year’s ChinaJoy:

Cloud gaming + 5G will enable a new way to play games

Cloud gaming was a hot topic at ChinaJoy this year. Cloud gaming will allow gamers to play games anywhere, at any time and on any device through video streaming technology. Cloud gaming requires superfast internet speeds, low latency and edge computing to provide a high-quality service. China’s upcoming 5G launch in October will be able to provide this and enable cloud games to run at the highest quality. 5G is a key driver for cloud gaming and we believe that adoption of cloud gaming in China will be tied to the nationwide 5G roll out.

Tencent stands to benefit the most from cloud gaming due to its large library of titles that it can offer on its own cloud gaming distribution platform, all powered by Tencent Cloud. The company demonstrated its cloud gaming platform at ChinaJoy which allowed gamers to instantly play WeGame PC titles within the client at the click of a button.

Esports gets increased investment from public and private sector

Esports has been a key driver of games revenue and engagement in China where there are more than 300 million esports fans. Esports had a large presence at ChinaJoy with top tournaments such as the ChinaJoy Cup Finals, National Electronic Sports Tournament and the China Esports Tour. Chinese gaming companies such as Tencent, Perfect World, NetEase, Bilibili, Shunwang and others hosted hundreds of smaller esports tournaments during the exhibition and we noted that the crowds were extremely passionate and enthusiastic, especially when getting to meet their favorite players.

Home to more than 80% of esports clubs and 40% of tournaments, Shanghai is China’s esports capital and the city held its first esports week alongside ChinaJoy where new policy was announced and various esports tournaments took place. The Shanghai government confirmed that it would introduce seven new policies to support the growth of esports in the region. NetEase announced the same day that it would invest RMB 5 billion in building an esports park that would include a professional esports stadium as well as facilities for game development, team building and talent training.

Dedicated console gaming makes a splash

Despite China’s console market accounting for less than 2% of total gaming revenue, many were talking about console gaming at ChinaJoy this year as it was the first year that Nintendo officially attended the event. Tencent confirmed in April that it would work with Nintendo to bring its Switch console to China and the two companies held a joint press conference at ChinaJoy where they confirmed that Tencent would localise and publish Nintendo hardware and software in the country, launch an official eShop with WeChat Pay support and utilize Tencent Cloud to support Nintendo’s Online network.

Whilst Nintendo has only had a limited presence in China before, its IP is popular across the country and sales of the Switch have been extremely strong through grey market channels. The Nintendo booth was extremely popular with long queues to play four games on display. The PlayStation booth was also popular as it focused on titles from Chinese developers including Monkey King: Hero is Back, a PS4 exclusive game based on the Chinese novel. Genshin Impact was the premiere game at the PlayStation booth and from what we saw was without a doubt the most popular game.

Dedicated gaming is for PC and mobile players too

Whilst consoles are classified as dedicated gaming hardware, due to their gaming first focus, PCs and smartphones have always been classified as multi-purpose devices. This is starting to change as hardware companies, CPU/GPU companies and accessory makers create gaming first products for the PC and Mobile space. Qualcomm demonstrated its Snapdragon Elite Gaming Platform at ChinaJoy, a set of hardware and software features that aims to turn premium mobile phones into dedicated gaming devices. Mediatek announced its new Helio G90 chipset that is designed to boost the gaming performance of mid-range smartphones.

There are more than 600 million mobile gamers in China driving the rise of dedicated gaming smartphones. Nearly all smartphone manufacturers in China offer at least one dedicated gaming smartphone and we expect sales of gaming smartphones to continue increasing as mobile esports takes off. PC gamers were not left out at ChinaJoy with companies such as Nvidia demonstrating its new RTX Ray Tracing technology which we believe will be a key technology in the PC and Console space.

Chinese publishers are expanding overseas

The global expansion of Chinese game companies was a hot topic at ChinaJoy this year. According to App Annie, there were only 3 Chinese game publishers with overseas revenue exceeding RMB 500 million in 2015 whilst in 2018 there were 18 Chinese publishers that achieved this milestone. ChinaJoy brings together the world’s top game developers and publishers and is a chance for Chinese companies to find partners that can help them target overseas players.

Whilst Chinese game publishers are bringing self-developed titles overseas, they are also acquiring Western IP and game developers to help them with this endeavour. Some companies are even starting to hire staff overseas to build new development studios, as is the case with Tencent, NetEase and Perfect World. Tencent specifically announced at ChinaJoy that it is looking to work with partners in South Korea and Southeast Asia to offer cloud-based games.

Regulations remain a key part of China’s gaming industry

China’s gaming market has become known for its strict and hard to navigate regulatory environment and this year has been no different. China restarted its game approval process in December 2018 after a nine-month licensing freeze and we have since seen China’s gaming market rebound. That being said, regulators are still introducing new policies in the gaming space and Guo Yiqang, the head of the publishing bureau of the Communist Party’s Publicity Department, gave a speech at ChinaJoy which provided more color on how the SAPP would regulate the industry moving forward.

In the speech, Guo noted that the SAPP would continue to strengthen the regulation of games both during and after the approval process in order to ensure that content remains in line with party values over the lifecycle of the game. There is also a push to curb gaming addiction among minors and focus on high quality games that promote Chinese values and culture. Guo is also pushing for Chinese game companies to explore how 5G can enable cloud games as a way to demonstrate the potential of 5G and grow the games industry.

Summary

Other trends such as Virtual/Augmented Reality, Artificial intelligence, ACG (Anime/Comics/Games) and more were also hot at ChinaJoy this year. China’s digital games market has returned to healthy growth in the first half of 2019 after the game approval process was restarted at the end of last year. Niko Partners will continue to explore these trends and offer additional insight, starting with our Asia Cloud Game Market Report releasing soon.