here’s a new sheriff in town, and its name is China. After decades of dominance, the world’s leader in global games revenue has changed hands from the U.S. to China. According to data revealed by the Ministry of China, revenue in China’s games sector attained $22 billion in 2015 buoyed by the country’s 670 million internet users (almost half the population of China)—370 million of which were playing online games (larger than the U.S. population).
Notwithstanding Japan, no other country has risen as fast as China has, from a country that once banned game consoles for over a decade to the most profitable country for games in the world. By 2019, games research and analytics firm Newzoo predicts gaming revenue in China to reach $28.9 billion, with mobile accounting for $13.9 billion. Seeing as more than half the country still yet to become internet users, the opportunity for growth is immeasurable. Now, more than ever, is the golden era of gaming in China.
China’s breakneck growth in the gaming market is no coincidence. In essence, the console ban sparked a chain of events that led to mobile gaming’s swift ascension. Since Chinese gamers had no semblance of a world with game consoles for over 10 years, they, in turn, adopted and embraced PC and browser-based MMO games—most of which using the free-to-play model such as 2001’s The Legend of Mir 2. Accordingly, gamers in China made a smooth transition to free-to-play mobile games—especially when F2P became the country’s dominant pricing plan for mobile.
Internet and gaming giants Tencent (makers of messaging app WeChat and King of Glory), NetEase (creators of Yin and Yang Shi and Fantasy Westward Journey) and other domestic companies are reaping the rewards of China’s mobile gaming explosion. In Q2 2016, Tencent reported $5.38 billion in revenue, with online game revenue up 32 percent year-on-year. Meanwhile, NetEase posted $1.47 billion in Q2 2016 revenue, up 96 percent year-over-year. Revenue from online game services for the Beijing-headquartered NetEase, in particular, rose 76 percent from the same quarter of the previous year.
Now, Chinese mobile game developers with strong domestic performance are looking westward to fuel growth. Tencent, China’s No. 1 mobile gaming company, bought a majority stake in Supercell—one of the most profitable western free-to-play game devs—from SoftBank for $8.6 billion in June 2016 (you can read more about the top 2016 Chinese acquisitions in this report). An acquisition such as this proved that the revenue potential in the West is undeniable. Asian games market researcher Niko Partners pegged Chinese game devs to generate $1.3 billion in revenue from foreign markets. By 2020, such revenue is projected to hit $2.1 billion.
All of these advances in the Chinese app market have come at a price, though. Foreign mobile game developers haven’t had the best of luck penetrating the walls of China. Countless regulatory hurdles, fragmentation among app distribution providers and cultural differences combine to make China an unfriendly market to outside game devs.
In this edition of the Power-Up Report, we go on quest to explore China’s mobile gaming dynasty. Through a range of interviews with Yodo1, Zenjoy, Newzoo and more, we decode how mobile game developers can build successful businesses in China. This guide will provide exclusive insights from Niko analyst Daniel “ZHugeEX” Ahmad on China’s latest publishing rules, highlight trends shaping the Chinese market, provide advice for launching games from West to East and East to West, and more. Let this guide be your compass to chasing mobile gaming greatness in China.
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