The Buy to Play (B2P) games market in China is heating up after strong growth over the last few years. A number of events have taken place this year that show interest and investment in the B2P games market is growing. Niko Partners forecasts a market size of $1 billion in China by 2022, up from $580 million in 2017. Digital distribution, higher disposable incomes, DRM software to combat piracy, and the growth of PC online game distribution platforms in China has led to publishers being able to monetise both at launch and post launch in B2P games.
Steam will be officially released in China
Perfect World confirmed in June that it would work with Valve to create ‘Steam China’, an official and legal version of Steam for the China market. The agreement has been made due to the longstanding relationship the two companies have, Perfect World currently operates both DOTA 2 and Counter Strike: Global Offensive in China. The agreement will see Perfect World promote and localise both Steam China itself as well as games that launch on the platform. Valve will handle software authorisation and tech support. Valve also confirmed that the international version of Steam will remain in operation and unaffected.
The International version of Steam first took off in China during 2013 when Perfect World and Valve launched DOTA 2 in China. With the game requiring an official Steam account, millions signed up for the platform and this led to Steam becoming an established player in the Chinese B2P market. It’s worth noting that the International version of Steam operates in a grey area as games on the platform are not approved for sale. With the launch of Steam China, all games will have to be approved for sale by regulators before launching on the platform. Whilst this ultimately offers a way for developers and publishers to enter the China market officially, approval times are slow, regulations are strict, and localisation can be costly, meaning that Steam China is likely to have a significantly smaller library than the International version of Steam.
It remains to be seen what happens to the International version of Steam in China but currently it can be accessed by Chinese gamers without a VPN. Valve has stated that there will be no changes to the International version of Steam and we do believe that Chinese gamers will always find a way to access this version of Steam. However, we are still aware that the Chinese government or even Valve themselves could introduce a block or region locking which would force players to use Steam China instead. We understand that Valve is undertaking this move so that it can both please regulators and reduce the risk of being banned in China as well as better compete with other B2P platforms such as Tencent’s WeGame.
There are a number of factors that have led to the growth of the International version of Steam in China over the past few years. Steam offers a wide variety of games on its platform, many of which are not officially approved for sale or are banned in China. A large number of these games have also been localised into Simplified Chinese and Steam now supports local payment options such as TenPay, AliPay and UnionPay as well as regional pricing. This has led to banned games like Grand Theft Auto V selling over 1.5m units in China and last year we saw PUBG explode in China with 15m paid unit sales via Steam. There are now over 30 million registered users on Steam in China, more than double the amount last year.
Tencent to bring WeGame to a global audience
Tencent launched its own B2P game distribution platform in September 2017 called WeGame. The aim of the platform is to attract third party developers and help them localise, publish, operate, and promote B2P games on WeGame (with the goal of unseating Steam in China). Tencent is playing by the rules in China, having each and every game approved by the SAPPRFT before launching the game on its platform. This is similar to how Steam China will operate when it launches and means that Tencent currently offers a much more stable platform for publishers than the international version of Steam does, but at the same time it means some games will need to make drastic changes in order to be approved for sale in China and this could lead to long approval times.
Tencent confirmed in July that it would launch an international version of WeGame, putting the platform in direct competition with Steam outside China. The company plans to use this version of WeGame to bring more Chinese games to the global market. Games will also be able to launch much quicker on the international version of WeGame as there is no requirement for official game approvals prior to launch like there is in China. This means that Chinese Mainland gamers could also benefit from the International version of WeGame by getting access to games early.
Tencent is working with publishers like Capcom and Koei Tecmo to bring Monster Hunter World and Dynasty Warriors 9 to WeGame. The Monster Hunter brand is relatively popular in China and Tencent have secured rights to publish the Simplified Chinese version of the game in China, whereas the international version on Steam will only get the Traditional Chinese version. With a lower price on WeGame, better localisation support and local servers, this is a huge win for Tencent and Monster Hunter World has already racked up more than 1 million pre-registrations on the platform. However, WeGame only has these advantages for a few games and there are still thousands of games on the international version of Steam that aren’t available on WeGame yet.
WeGame has already had success with games such as Don’t Starve which has sold over 2 million units in China. Other top sellers include Stardew Valley, Icey and more. Tencent is poised to bring more top games to the platform such as Ubisoft’s Rainbow Six Siege as well as a selection of top free to play games such as Fortnite to unite both F2P and B2P gamers on one platform. Games like Grand Theft Auto V, Civilization 6, Rise of the Tomb Raider, H1Z1, Dead by Daylight and Lost Castle have been huge successes on Steam in China. PUBG was the highlight of last year on Steam, helping drive considerable growth.
The competition between Tencent and Valve is only just beginning. Valve is looking to obtain an official presence in China through its partnership with Perfect World. Due to its dominant position on the world stage, most developers and publishers will always look to support Steam first, especially as the international version of Steam is still available to Chinese users. However, Tencent is looking to gain favour with developers and publishers as it expands its store globally and offers a much more streamlined path to the China market as the company is able to leverage its expertise in games localisation, distribution, acquisition and marketing. We will continue to follow the regulations, policy, demand and trends around Steam, WeGame and other B2P channels in China.