The Covid pandemic resulted in millions of people across the world enjoying video games. Indeed, in China, online gaming reached new highs as consumers looked for ways to entertain themselves during the lockdown.
One popular game in China is Honor of Kings, and during Chinese New Year, its streaming platform – Douyu – reported over 60 million streams, double the previous year. Tencent also said that its gaming services grew sharply during the past year.
China’s gaming industry has long been powerful – the Chinese are renowned for their love of games – and the market is hugely attractive to Western entrants, with the country’s gaming revenue for 2019 hitting a whopping US$36.5 billion. It is now only second to the USA as the world’s biggest gaming market. Predictions suggest that it will soon become the leading market, with mobile gaming leading the way. In fact, gaming – particularly eSports – form such a huge part of Chinese life that there are entire sports leagues, TV shows, mass-participation events, and even professional video gaming schools in China!
However, although the size and growth of this hugely lucrative market are immensely attractive to businesses, the Chinese gaming market is highly complex, with a large regulatory framework that regularly changes.
What must foreign entrants consider?
Gaming in China is subject to strict rules and a high level of oversight. The market was reformed heavily in 2018 and is still evolving. For an online game to be marketed in China, its content must first be approved by the regulators and assigned a license.
If the regulators decide that the game’s content is inappropriate (too much sexual innuendo or violence, for example), they will deny the license. China’s approval framework must be taken very seriously by Western gaming companies, as licensing is exceptionally selective. In 2019, Chinese regulators approved 1,570 games, but only 185 were from overseas publishers.
How to get your game listed in China
As of June last year, every online game needs an International Standard Book Number (ISBN) to be listed on China’s app stores (the same 13-digit code found on books.)
There are also rules on age to consider, as under 18’s are subject to strict rules that limit their time spent gaming online, impose spending limits, and include curfews.
How can foreign investors enter the Chinese gaming market?
It can be time-consuming to enter the Chinese gaming market, as the regulatory framework requires significant cooperation with Chinese state entities.
Using a foreign server – accessing a very limited Chinese market
Some foreign developers earn Chinese sales by using foreign servers, where gaming platforms have overseas servers. If a developer is hosting a game on a foreign server only, a formal presentation isn’t required – so they don’t need to get a Chinese license, ISBN, or establish a wholly foreign-owned enterprise (WFOE) presence. However, these servers aren’t widely accessible in China, as they require a VPN. Additionally, Chinese users may struggle to use non-Chinese payment systems – WeChat Pay and AliPay are the most common systems used in China. (Note that most Chinese gamers will use the Chinese Apple Store, the Tencent app store, or other domestic platforms.)
Formally entering the Chinese Gaming Market
1. Find a partner
So to formally enter the Chinese gaming market, a foreign developer will need to find a Chinese partner. For example, Nintendo, a Japanese firm, uses a partnership model with Tencent to distribute its games in China. The partnership will allow you to register your games and market them with a commercial arrangement that splits revenue between the partners.
2. Consider your structure
It can also be valuable to set up a WFOE if you are planning to market games in China over the longer term. This will allow you to collect payments, employ staff, and market in China as a foreign developer.
3. Review for regulatory compliance
Once your structure is set up, it is valuable to review it on a regular basis to stay up to date with the changing rules.
4.Learn about China for further gaming development
The Chinese gaming market is so vast, so different, and so highly evolved that Western developers should also spend time getting to know it. If your company doesn’t have a high degree of knowledge about eSports leagues, gaming forums and exhibitions (including mass participation events), and video schools, it’s time to find out more! Additionally, it’s essential to understand how games are used by certain groups in China, such as the Animal Crossing game, which has evolved to become a design platform for designers and fashionistas – something which the creators might never have envisaged!
5. Market effectively
You will undoubtedly need an official Chinese website to market your game in China, fully optimised for human readers and Baidu search bots alike for ranking.
You’ll need to promote your video game franchise on Baidu, integrate your digital assets to maximise your content, build a quality, trusted brand and strong e-reputation (online reviews from independent sites can help with this.)
Host your game on WeChat, making use of Mini-Programs and the other rich features on the site, such as H5 pages (which can be used to create interactive marketing materials.) List your game on other relevant sites, too, such as Apple China and Tencent. Host and post content and run advertising campaigns on other critical social platforms in China, such as WeChat, Weibo, Bilibili, the Chinese video-sharing platform, Douyin, etc.
It’s also valuable to partner with a relevant KOL and to consider strategic marketing partnerships that offer the immersive, holistic marketing experience that millennials and Gen Z customers crave. For example, Burberry and Tencent have collaborated on a fashion-led game that launched the fashion house’s new collection, and Honor of Kings collaborated with MAC makeup to offer customisation of looks to key characters using new MAC palettes.