After Licensing Freeze, China’s Game Industry Recovers Hardly | Technology

Beijing, China – China’s nine-month freeze on computer game licensing has ended after 45 new titles were approved earlier this month, and game stocks have soared.

But the country’s computer games sector faces a rocky road to recovery as Beijing continues its sweeping crackdown on games, according to industry insiders and experts.

Measures rolled out by Chinese authorities since last year include time limits on online games for underage players to combat addiction and rigid real-name verification rules prohibiting adults from making anonymous purchases in the game.

According to Francesca Yu, marketing manager at AppInChina, a Beijing-based software company that helps companies publish and promote mobile apps and games.

Another major hurdle, according to Yu, is the “fierce” competition in China’s gaming industry. With behemoths like Tencent and NetEase controlling well over half of the market, smaller, independent developers are fighting for the scraps. There were about 300,000 game companies with a capital of less than 10 million yuan ($1.5 million) in China last year, according to enterprise database Tianyancha.

This means “with dozens or hundreds of ISBNs being issued every month, many companies are still facing bankruptcy,” Yu told Al Jazeera.

Nir Kshetri, an economics professor at the University of North Carolina at Greensboro who has studied the dots of China’s gambling industry, said tens of thousands of companies went out of business when China put put in place its licensing freeze in July 2021.

“Many of the gaming-related businesses that are operating have significantly reduced their workforces,” Kshetri told Al Jazeera. “Due to the lack of a rich gaming ecosystem, Chinese developers are likely to face significant challenges in monetizing their games until the ecosystem is rebuilt again.”

Chinese companies Tencent and NetEase control more than half of the national gaming market [File: Brent Lewin/Bloomberg]

Despite the challenges, some local developers believe the sector still has huge untapped potential.

A Shanghai-based game designer, who spoke on condition of anonymity, said that while the licensing freeze has hurt mobile games, “the established global user base for distribution platforms like Steam, Epic Store, etc. is just too big to ignore, and Chinese games without a proper government license, they can still reach the Chinese audience through them, and usually get a free pass, unless they contain content strong political or pornographic”.

He said the industry remains attractive to him and many of his peers. Not only does the industry offer competitive salaries and significant overtime and other benefits, he said, but its infamously long working hours don’t differ much from the grueling schedules of Western studios.

“Personally, unless I get a studio job in a Nordic country, I’ll stay in China,” he said, referring to the lure of Scandinavian work-life balance.

A Beijing-based employee at a video game advertising company, who also spoke on condition of anonymity, expressed a similar sentiment, saying he felt little desire to go overseas given the barriers. linguistic and cultural skills and competitive salaries in China.

Still, work pressures are intense, with many Chinese game company teams demanding to “update things like their game themes within a week”, he told Al Jazeera. “A similar company in America would often have a month to come up with a new theme. So the labor intensity is much higher here.

Kshetri, a professor at UNC Greensboro, said there are benefits to staying in China despite intense pressures on workers and an increasingly oppressive regulatory environment.

“With 720 million gamers in 2021, China’s gaming industry is the largest in the world, providing plenty of opportunities for developers and others in the gaming ecosystem,” he said. “Such opportunities cannot be matched in other countries.”

Look abroad

The industry may also be able to ease some of the growing burdens of local restrictions by seeking to expand overseas. During the licensing freeze, many Chinese game companies have shifted to publishing their titles overseas.

Yu said Chinese game companies are increasingly looking to the international market, not least because the number of licenses issued in China was already down sharply before the recent freeze.

Chinese authorities approved 9,369 titles in 2017, just over two thousand in 2018 and only 755 in 2021.

This trend indicates that regulators will issue fewer licenses each year, Yu said, suggesting “that the number of games that can be published in mainland China is also decreasing.”

“Competition among Chinese game developers for the few ISBNs that can be issued each year drives them to look for other opportunities…making distribution in China increasingly difficult, forcing Chinese game developers to publish elsewhere” , added Yu.

Kshetri, however, warned that getting games published overseas is easier said than done.

“They mainly take into account the preferences of Chinese consumers, which are different from the preferences of consumers outside of China,” Kshetri said, citing Tencent-distributed blockbuster Honor of Kings, which has a 97% user base. Chinese, as an example of a Chinese success. game that has relatively little overseas appeal.

“The games developed by most Chinese companies are based on themes that are not popular outside of China, and most non-Chinese gamers don’t understand the stories,” he said.

The game designer from Shanghai agreed that the Chinese game industry lags behind much of the West in terms of R&D and production processes.

“I’ve worked and spoken with people who come from studios with hundreds of employees who don’t have proper processes and solve most problems with time, money and constraints,” he said. -he declares. “So if a specialist wants to work on bigger games, there’s a good chance that studios outside of China offer better opportunities.”

Even so, local industry watchers say the gap is narrowing, with talent from Western giants such as Ubisoft and Virtuoso increasingly shifting to Chinese game studios.

“In a few years, Chinese companies can catch up because they have more intense workflows and are continually tasked with updating their games so quickly,” said the Beijing-based game advertiser.

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