As of March 29th, a total of 989 video games have received licenses since approvals restarted on December 19th. China’s new gaming regulator, the State Administration of Press and Publication (SAPP), halted approvals at the end of March 2018 for a period lasting nine months, to restructure and reform the licensing process. China’s government has taken steps to crack down on gaming addiction among minors, more strictly regulate content in games and limit the number of games entering the market each year. Whilst the tough regulatory environment has had an impact on growth rates and publisher financials in 2018, we are starting to see positive signs that the market has begun to rebound.
959 domestic titles approved
All games, foreign and domestic, must be published via a licensed domestic publisher, and games must be licensed as well. A total of 959 domestic titles have been approved for distribution (licensed) since the restart in December, including 914 mobile games, 40 PC games and 5 console games. However, all of these have been in the licensing queue for many months.
The 989 licenses have been announced in 12 lists, the latest one announced on April 2nd. Finally in recent lists we have seen games by big name publishers, such as Tencent and NetEase. Earlier lists were comprised of games predominately by small publishers, though a couple titles from the “big guys” were approved in January too, such as Perfect World Mobile. It is a mobile version of the popular PC MMO of the same name from developer Perfect World Entertainment. The game, which launched commercially on March 5th and is published by Tencent, was the #1 grossing iOS game in March in China, dethroning Honor of Kings which had remained at the top for more than two years.
30 foreign titles approved
SAPP cautioned the industry that they would mostly focus on approving the large backlog of domestic games first before approving foreign titles. This was distressing for global developers because they had not had a game licensed since March 2018 – a full year. The list announced March 29th had 30 foreign games: 22 mobile games, 5 PC games and 3 console games. Japanese IP was the most common, accounting for 9 of the games, with US IP coming second and accounting for 6 games.
We note that key titles such as Yoozoo’s and Tencent’s ‘Game of Thrones’ and NetEase’s ‘The Room 3’ were included in the batch, but that larger titles such as Fortnite and Call of Duty Mobile have yet to receive a license for monetisation. Whilst the number of foreign titles may seem low, we note that only 55 foreign titles received licenses during the first quarter of 2018. Historically we have seen 467 foreign titles in 2017 and 227 in 2016 – but despite being a fraction of the total games published in China per year they tend to have a disproportionately high share of total revenue.
The approval process in 2019
The rate of approvals is slower than it has been in prior years. In Q1 2019 there have been 795 titles approved compared to 1,931 titles during Q1 2018. This is primarily due to a crackdown on titles in the poker and mah-jong genre after China’s government became concerned about real world money being used in these games. In Q1 2018, 49.8% of game licenses (equal to 962) were for poker & mah-jong games whilst there were zero poker & mah-jong games approved in the first quarter of 2019. The lack of poker & mah-jong titles is the main reason why the number will be lower this year than in past years.
Despite the temporary game approval freeze last year, demand from gamers remained high and the Chinese game industry demonstrated growth, albeit it a slower rate. With approvals beginning to ramp up and the recent addition of foreign IP at the end of March, we believe that the outlook for 2019 is positive.
We keep close tabs on this stuff via our our China Games Market Database and we want to help you do the same. Contact us if you’d like to know more and watch for our upcoming China PC Games Market Report and China Mobile Games Market Report – both set to be published at the end of April.
Source: Niko Partners 2019