The 19th China Digital Entertainment Expo & Conference (ChinaJoy) took place July 30 – August 2, 2021, with a theme “Create Dreams with Technology and Win the Future with Fun.” There were more than 500 exhibitors across the B2B and B2C segments, nearly 30% of which were foreign, that displayed games, hardware, accessories, and new technological innovations. There were 4 key categories: the metaverse, esports, cloud gaming and going global. Niko Partners Vice President Zeng Xiaofeng represented our company at the event.
COVID-19 Precautions and Impact
ChinaJoy organizers announced to the public beforehand that it would take precautions to ensure the health and safety of visitors, due to an immediately recent outbreak of delta variant cases in Nanjing and Yangzhou. These precautions were tightened significantly in the lead up to the event as the number of cases grew. In fact, one day before the opening, attendees and exhibitors were informed that they must present a negative COVID-19 test from the past 7 days to enter, which seemed difficult enough, until the next announcement at 3am the following day when they announced the test must have been done within the past 48 hours, which made it truly chaotic. Further, exhibitors had to halt all live stage performances, including esports events. The sale of new tickets was also halted, and people who had tickets or passes but couldn’t meet the new requirement were allowed to apply for a refund. This severely limited the number of attendees, and for the second year in a row, organizers chose not to publish the total number of attendees (actually, they tally the number of gate entries, not unique visitors), which reached 364.7k 2019.
This year’s event had all the major exhibitors we’ve come to expect at ChinaJoy, but attendance was much smaller than usual. It was simple enough to walk around the exhibition and play games or try out products without having to queue, yet Tencent, NetEase, Sony, miHoYo and TapTap booths were extremely busy with queues. While mobile games were the main focus at the event, similar to recent years, there was a somewhat larger presence for PC and console this year. Sony especially invested in a much larger booth to show off its PS5 console, which released in the country on May 15. The PlayStation booth included the first playable demos of Tales of Arise and Dynasty Warriors 9: Empires, as well as a first look at the console version of Naraka Bladepoint.
Domestic game companies such as Tencent, NetEase, Perfect World, Shengqu, XD Network, Bilibili and miHoYo showcased new titles and demoed games. Games in the anime/comic/games/novels (ACGN) genre were plentiful, as were games targeting female players. Foreign companies had big crowds, especially at the Sony Ubisoft, Bandai Namco and DeNA booths. Fans at the Ubisoft booth had the chance to try out Rabbids: Adventure Party, a new game that combines the Rabbids IP with a Journey to the West themed party game, which released exclusively for Nintendo Switch owners in China on August 5. Riot Games, which is owned by Tencent, announced that it plans to strengthen its focus on the China market with a new studio in Shanghai that will hire hundreds of staff to work on new games based on both existing and new IP. This follows in the footsteps of companies such as Supercell and Garena, both of which also opened studios in Shanghai.
ChinaJoy notably expanded from past years to include gaming ecosystem companies, beyond traditional developers and publishers. New exhibition areas this year included VR/AR, Sci-Fi Con, Digital Human AI and figure model collections. VR/AR played a large role at the event yet focused on location-based entertainment rather than at-home gaming. Live streaming and esports companies had larger booths this year, and even car manufacturers such as BYD had their own booths, as they partnered with popular game IP to promote new car models. ByteDance exhibited through its Ohayoo brand that focuses on casual games, but quite notably its Nuverse brand was nowhere to be seen. Nuverse is the core game segment of ByteDance, which recently published Ragnarok X: Next Generation & One Piece: The Voyage in addition to acquiring Moonton Games and C4 Games.
The metaverse is a next generation digital experience that is making its way into gaming. The metaverse is defined as the convergence of physical, augmented, and virtual worlds within a shared online space. Global gaming and tech companies such as Microsoft, Facebook, Epic Games and Roblox Corp have all talked about how they want to build a metaverse. Liu Ming, vice president at Tencent, said in a speech at ChinaJoy that Tencent believes it can build a hyper digital reality within gaming that is a persistent virtual space powered by new technologies and social interaction that combines the virtual and real world. Tencent is leveraging its investment in Epic Games, its joint venture with Roblox Corp and its push to build large scale AAA experiences to enter this space. The company plans to create 8 to 10 ‘metaverse like’ games over the next 10 years. This is essentially going beyond what Fortnite or Roblox offers and building worlds with infinite possibilities.
China is the largest esports market in the world with over 400 million esports game fans according to Niko’s 2021 Esports in Asia report. Shanghai plans to become the esports capital of the world and reiterated its commitment to the industry at the event. 200 esports matches were planned for the 4-day period, but many of them were cancelled due to COVID-19 restrictions implemented after the first day. Traditional publishers such as Tencent, NetEase (incl. Blizzard) and others showcased top esports titles such as Honor of Kings and Overwatch. But other esports centric exhibitors such as live streaming platforms, short video platforms, hardware manufacturers and even e-commerce companies had plenty to show too. JD.com, a well-known shopping platform in China, had a 3,000 square meter booth during the exhibition to promote esports centric products from PC accessories to home appliances. JD has cultivated a large esports following through its JDE and JDG esports teams that compete in Honor of Kings and League of Legends.
Cloud gaming is another growing segment in China, with government and publisher backing, and numerous B2B and B2C companies building it out. China has rolled out 5G to major cities, but most of the cloud gaming platforms available are still in the experimental stage as the companies look to solve issues related to infrastructure and business models. Companies in the space used ChinaJoy to announce updates to their cloud gaming solutions, as they continue to experiment. For example, China Mobile’s Migu subsidiary formed a partnership with Kingsoft Cloud and Xiaomi to explore new ways to distribute cloud games over a 5G network. Xiaofeng tested Tencent’s START cloud game platform, which focuses on PC & Console games, as well as their Xianyou cloud gaming platform, which focuses on mobile games. Our upcoming Asia Cloud Gaming report will explore the viability of cloud gaming in China and 10 other Asian markets.
The success of domestic titles such as Genshin Impact and AfK Arena overseas has put higher emphasis on global expansion for many Chinese developers. Several spoke at the ChinaJoy International Game Business Conference to share their experiences around how they had developed high quality games, created strong localization teams, and gained success outside China. While the majority of this success has been on mobile, with Chinese mobile game exports exceeding $12 billion in 2020 according to Niko’s 2021 China Mobile Games Market report, we are also seeing increased success on PC and console from small and medium sized developers. Chinese indie game publishers such as Gamera, Lightning Games and Yooreka, as well as mid-sized publishers such as miHoYo have done well with games like Dyson Sphere Program and Genshin Impact on PC and console overseas. With increased investment in global games from large Chinese developers, we expect to see more Chinese developed titles become hits in the global market.
Market observers are keenly aware that regulations are the single biggest barrier of entry into China’s vast games market. As recently as the first week in August 2021 Chinese game companies experienced declining stock prices due to investor concerns of even tighter regulatory measures. Importantly, Chinese government officials have taken a positive view on gaming over recent years, and this was backed up by Yang Feng, the deputy director of the Publishing Bureau of the Central Propaganda Department, who advocated for the growth of the games industry. There is heightened emphasis on curbing gaming addiction among minors via regulations and policy. We do not expect to see sweeping reforms to the games industry as a whole, as we saw during the game license approval freeze in 2018, rather additional focus on anti-addiction systems, age rating systems and parental control apps that are already in place. Even with increased regulations in this space, we do not see a material impact to growth in the short term, as, for example, merely 3.2% of Tencent’s gross gaming revenue in 2020 was from people under age 16. Those that want to spend will continue to find a way and the majority of spenders are older than 16. For a deeper breakdown on regulation in China, see Niko’s China Regulations & Business report.
Nothing can stop China’s games industry, nor the industry’s flagship expo ChinaJoy, not even COVID-19. While other video game exhibitions and conferences have switched to a digital only format during the pandemic, ChinaJoy remained in person and Niko Partners has attended all 19 events, starting with the first one in Beijing in January 2004. Fun fact: the 1st ChinaJoy was supposed to be held in Shanghai in 2003 but something happened, can you guess what it was? The SARS CoV-1 pandemic. True story. The show moved to Beijing 6 months later for that one year only, but it still took place.