On Thursday, December 20th, a senior official of the ruling Communist Party’s Propaganda department announced the game approval process would be restarted after roughly 9 months. Every game to be published in China is required to undergo the official approval process, and if successful, is assigned a unique publication number. That means that for most of the year, no new games could be released in the world’s largest game market.
What exactly happened, how did it happen, and what lessons for localization of games from and for China can we take from it?
From modest beginnings in early 2000s, the Chinese gaming market has grown by leaps and bounds. According to the market research agency Niko Partners, China will enjoy strong growth in digital gamers and games revenue in the next 5 years, to reach $42 billion USD in domestic revenue by 2022 with most coming from mobile games. With nearly 600 million gamers (more than 2x the population of the US), China is by far the world’s largest mobile games market and makes up more than 25% of global mobile games revenue. Overall, valued at US$38 billion the market is now the largest in the world.
You’ll notice the major position of mobile gaming in the infographic above. Since China is a recent entrant to the industry, it initially leapfrogged the stage of expensive and cumbersome PC gaming rigs and went straight to mobiles. Smartphones are now omnipresent in China, and serve many daily needs of the population, including entertainment. Despite a slow start, PC gaming in China has caught up in recent years and is now also the largest market in the world, ahead of the USA. What about game consoles? The reason for their absence is different. In 2000, a blanket ban on gaming consoles meant that Sony, Microsoft and Nintendo were simply not allowed to release any of their consoles in the market. The only PlayStations, Xbox’es or Wii’s to be found in China were purchased in the gray market or imported by individuals. Despite lifting of the ban in 2014, consoles have never taken off and are now dwarfed by mobile and PC gaming. The mobile market is dominated by a constellation of Android marketplaces of which the main ones are run by the digital giants Tencent, Xiaomi, Baidu, Huawei and Oppo. iPhones and iTunes are far behind, at about 20% of market penetration. Conspicuously absent from the list is Google’s own marketplace. That is because it is completely banned from the country since 2010 along with all other Google services, such as Search or Maps. China has embraced Android as a mobile OS wholeheartedly, but decoupled it from Google.
Publishing games in China has never been easy, especially for foreign companies. To be issued a game publication number, all publishers had to apply for a review which could take weeks. It combed the games for content such as nudity, gore or negative depictions of China. Over time, the requirements were getting more strict and companies had to make significant localization changes to their games before publishing. Finally, it reached a point where foreign companies had to partner with a Chinese publisher if they hoped to release their game in China quickly and without hurdles. On March 28th, 2018 it all came to a halt for both domestic and foreign publishers. Approvals were no longer issued at all ostensibly amid concerns about the amount of time consumers are playing online. This slowed the growth of the Chinese market to a crawl.
Since then, there have been plenty of rumors about what’s going on:
Myopia â€“ China’s Ministry of Education believes the increase in the use of video games and the internet may be causing higher rates of near-sightedness among minors and issued recommendations which partly targeted video games.
Game monetization â€“ Authorities have sharply criticized the business model of specific games, with the state-run People’s Daily notably lashing out at Tencent’s Honor of Kings mobile game last June accusing it may effectively constitute gambling, something taken very seriously in the country.
Reform of government bodies – The State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) which dealt with game licenses was abolished and its duties were divided between a new body, the State Administration of Radio and Television (SART), and the Communist Party of China’s Publicity Department.
Review of existing games – earlier in December, state media unexpectedly reported that Chinese regulators had set up an online video games ethics committee, but instead of issuing new approvals, it focused on reviewing games already released.
The authorities have remained tight-lipped about what was going on and avoided any official announcements about how long the suspension would last. Seemingly unconcerned about the billions of dollars lost in valuation of their top companies like Tencent (which stock plummeted over 20% this year, wiping out over $100 billion in the company’s value), the public servants worked behind the scenes on the new program. Likely to curry favor with the authorities and address their concerns, Tencent was busy in proactively aligning their business practices with their goals. One example was the announcement that starting in 2019, it would start verifying the identities of all gamers playing its products in China against police records. The system would also include a strict limit on play-time each day – children under 12 can play for one hour a day, with children 12 and over allowed two hours. The state of limbo finally ended on December 20th, when a senior official of the ruling Communist Party’s Propaganda department said in a speech at a gaming conference that a new batch of approvals for games had been completed for the first time since March.
We hope through new system design and strong implementation we could guide game companies to better present mainstream values, strengthen a cultural sense of duty and mission, and better satisfy the public need for a better life – the official said according to Reuters.
According to a Hainan propaganda department official at the gaming event, the new approval mechanism is in a pilot stage in the tropical province. It would include positive and negative lists, combining artificial intelligence audits with expert censorship. This means that for now, the approvals will be a slow trickle, but even when they relaunch fully, itâ€™s likely to take months before the huge backlog of titles is reviewed.
Among the few loopholes which allowed foreign companies to circumvent the official game approval process has been Steam, the world’s near-monopoly in digital distribution of PC games. Itâ€™s been operating freely in China, same as in dozens of other countries around the world and making a game available to Chinese players was as simple as localization and targeting it to the Chinese gamer. Steam originally gained popularity in China thanks to the popularity of the game Dota 2, but the addition of more China-developed and Chinese-language games, plus regional pricing and local payment methods have helped attract more gamers from the nation.
Released only in Simplified Chinese, the game Chinese Parents became a bestseller on Steam
However, its position has become uncertain over the years. When I attended GMGC in Beijing in April 2018, rumors were rife that Steam’s days in China were numbered. Personally, I think itâ€™s avoided the attention of the authorities mostly because the PC market in China used to be small and few used the platform. In recent years, the number of PC gamers and the popularity of Steam started to grow, and the service now boasts an estimated 30 million users in the country. In fact, its rise was likely helped by the stringent approval process, which made Valve’s platform and the gray area it inhabited by far the simplest way to access a wide variety of uncensored games. Valve, the company behind Steam, must have been aware of the risk as they announced the launch of a new China-specific marketplace in partnership with Chinese publisher Perfect World. It is understood that the new marketplace will strictly abide by the country’s rules and will likely soon replace the international version. The two companies are in the process of getting final approvals from the Shanghai government, a necessary step towards creating a localized version of Steam. On the other hand, local competition has awaken in the form of Tencent’s WeGame, which has recently announced its plans to go head-to-head with Steam not only in China, but also internationally.
I think we can take two important lessons from all this, one for Chinese gaming companies, and one for the international ones eyeing the Chinese market.
For domestic game developers and publishers, the lengthy limbo must have been a very bitter pill to swallow. After taking part in a booming market for years, they were suddenly told to stop publishing for an undefined period, with no notice and little explanation. Many small and medium companies simply did not survive, and they had to announce bankruptcy or sell their business; others mothballed their offices and allowed their staff to seek temporary employment elsewhere in the hope of making it through the winter. For those that survived, the lesson is that they should not put all the eggs in one basket by focusing solely on the Chinese market. At any time, the rules can change again, or the referee may call a surprise suspension leaving them with no revenue for an unknown period. They should diversify and target foreign markets too, so that any disruption to their sales in China would not be a death-knell. In fact, the domestic market has saturated quickly, and international publishing and localization are now high on the agenda for most Chinese companies.
While there is no clear legislation on video game regulation, it’s up to the regulator to decide what they pass and what they don’t. There is still a lot of uncertainty – said an executive at Tencent’s game division, asking not to be named (Reuters)
For foreign companies eager to take part of the huge China cake, the lesson is different. Big Western publishers such as Ubisoft, Activision, EA and Take-Two have targeted China as a key growth area for their businesses, with some of them creating specific titles for the region’s gamers, while many small and medium-sized ones saw it as an increasingly important market. They have to take on board not only the same lesson as their Chinese counterparts; that they are at the mercy of an opaque bureaucracy which can practically shut down the market for them overnight; but also that the localization requirements have just increased. Four pillars of the new system were mentioned at the conference:
Chinese game companies should pay greater attention to their content. It needs to meet modern Chinese values and be politically correct.
Gaming companies should take more social responsibility and protect the children and teenagers.
Focus on game quality instead of quantity.
Support Chinese games to go overseas as an engine to promote Chinese culture and propagate Chinese values.
The final point is of course of additional importance to Chinese companies, but the first three spell an increased barrier of entry for international players. Previously, they mostly had to worry about making their games attractive to the Chinese gamers, now they’ll have to add new requirements to the list and focus on “quality games” as defined by the authorities. As always, great localization translates to great success in foreign markets. This is true now more than ever for China.