China’s new gaming regulator, the State Administration of Press and Publication (SAPP), released today a list of digital games that have been granted a license for publication. Tencent, NetEase and Perfect World have titles in this list, which is the 4th batch of licenses since December 19, 2018 which licensing resumed after a 9-month ban.
China’s game market was hit by a temporary game licensing freeze in March 2018, after a new gaming regulator, SAPP, was formed under the direct control of the Publicity Department of the Central Committee of the Communist Party of China (CCPPD). It took SAPP nine months to review and reform the game approval process before resuming game licensing. This has caused a backlog of games that were submitted over the past year and were waiting for a response to their request for a license.
The SAPP is currently working through the backlog in chronological order, reviewing games in the order that they were submitted, being announced in batches. The total number of licenses granted since December 19th is 353 (as of January 13, 2019.)
Tencent was granted two licenses this month, for the games Folding Fan and Wood Joints. The titles are part of Tencent’s expansion into the serious and educational games sector that aim to teach traditional Chinese culture to players. We note that these games are not designed for aggressive monetisation and therefore will not have a material impact on Tencent’s revenue growth this year.
Perfect World Entertainment received one license this month, for Perfect World Mobile. The game is the mobile sequel to hit PC MMORPG Perfect World that was originally released in 2005. Perfect World Entertainment are developing the game whilst Tencent has the publishing rights for China. We expect Perfect World Mobile to be a high revenue generating title for both companies.
NetEase has also received one license this month, for Spring and Autumn Period Wars. The game is a core MMORPG with PVP elements that is set during China’s Spring and Autumn period. We anticipate this to be a high revenue generating title for NetEase.
Until now, there had not been any games from large, well known publishers on the lists of new licenses granted by SAPP. The addition of Tencent, Perfect World and NetEase is a positive indicator that the licensing process has resumed in earnest. We expect that it will take the regulator around six more months to clear out the current backlog. It also remains to be seen whether Tencent will be awarded licenses for bigger games such as PlayerUnknown’s Battlegrounds for PC and Mobile.
Niko Partners will continue to track new game approvals in China as part of its China Games Market Database.