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The Chinese Gaming Boom: What's behind it?

Jun 6, 2018 7:00:00 AM

Back in 2013 everyone was getting excited about the $13 billion revenue of China’s video game industry and starting to watch how the country prepared for an explosion in gaming popularity. In 2017, that figure skyrocketed to a recorded $27 billion in domestic revenue with those numbers maintaining a similar upward trajectory.

Back in 2016 PWC predicted that China would realise 7% growth in video game revenue every year until 2020. A year later, Atomico’s CEO spoke about the power of Chinese gamers and the fact that they spend 30% more than US gamers. Now everyone’s money is betting on China, with many predicting this year will be the year we see over 650 million gamers in the country, chiefly driven by the rise in mobile game play. I’ve written about how China is set to be front and centre of the gaming industry, but how did it reach such incredible heights in just 10 years?

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Compared to the Japanese industry, neighbouring China had a slower start in gaming with a somewhat unsupportive political landscape and far poorer technology infrastructure in the early 2000s. While Japan was reaping the success of the Pokemon franchise - which was taking the whole world by storm - China was contending with a myriad of problems. From an unprepared market, lack of gaming hardware, cultural predisposition towards pirated software, and unrehearsed studios, it was always going to be an uphill battle. In “The Evolution of the Chinese Online Gaming Industry,” Journal of Technology Management in China, Nir Kshetri outlines the problems and how the tide began to turn: “High entry costs for customers and piracy were among the biggest roadblocks for the development of online gaming industry in the 1990s. In 2001, Chinese gaming companies launched innovative business models to overcome these barriers (Ewing, 2007). Online games' rapid growth is also associated with and facilitated by the growth of fixed and mobile broadband networks (KPMG, 2007).

In 2007, while the juggernaut-to-be Nintendo Wii was launching in Japan, the sale of games consoles was still illegal in China and video game bans were commonplace. China’s console ban was only lifted in 2014, so it’s a wonder to think that its video game market is now the largest in the world, according to Newzoo. But a string of locally-produced, commercial releases such as Demigods and Semi-devils, Assault Fire, and Fantasy Journey to the West 2, came out in less than a 10 year period and ignited a market that investors are still readily trying to tap into. The development of mobile games, shift in governmental attitude, and the demand of the surging middle classes have all bolstered China’s gaming industry and helped the country to secure its top spot.

Now, there is no going back. With eSports on the horizon and a Chinese state that understands the economic power of the industry, I predict there’ll be no stopping this behemoth. As its local talent become even more competitive and companies like The9 Limited, NetEase and Tencent begin to invest in social gaming platforms and western gaming studios

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