China Mobile Game News

As dongguan’s industry moves closer toward tech market. Our business experts have taken the chance to give us some updates on changes in the makers of mobile apps.

Football app - conceptThis year may be the one when China leads the world in online gaming. China’s online mobile and PC gaming market, as of 2014, exceeded RMB 100 billion, compared to the larger but slower growing U.S. market. Presently, China’s video game console ban is less relevant simply because in China as in the rest of the world, mobile gaming is soaring in double digits. As of 2014, China’s mobile gaming market came to exceed US$1 billion per quarter.

Chinese audiences have also demanded graphics-intensive free-to-play-games. Video game releases are still subject to China’s Ministry of Culture oversight, which is less restrictive than the movie content and distribution censorship. How then might a foreign strategic investor participate in China’s online gaming market, particularly in mobile applications?

China’s online gaming product market is currently led by Tencent, followed by Netease, Sohu spinoff Changyou, Shanda, and Kingsoft.

In addition, platforms attempt to aggregate game players. Sky-Mobi is a leading platform in mobile downloadable games. In addition, Baidu and Qihu as search engines; Alibaba as an ecommerce platform; and Xiaomi as a smart phone company integrating into software, are recognizing the value of establishing a presence in mobile game downloads.

How then might a foreign strategic investor participate in China’s online gaming market ..?

Partnering with these incumbents initially appeared to be the least risky alternative for most overseas game developers. Foreign game originators such as Take-Two introduced NBA 2K through Tencent. Activision brought World of Warcraft, to Netease. One notable rupture occurred between Shanda and its ally Korean game developer WeMade Entertainment. In 2003 Shanda developed a similar game as the one licensed from WeMade, and after being sued was able to reach a settlement with WeMade in 2009.

Upstart Xiaomi (privately owned) represents a mobile phone maker integrating backwards into game production as well as downstream game distribution. One firm has joined Xiaomi as a partner. Moscow-founded Game Instinct (now headquartered in Vilnius, Lithuania) has modified a game to run on Xiaomi phones.

Paris-based Ubisoft chose the organic route, establishing a Shanghai based game development center. However, Ubisoft’s reach has not yet translated to depth, and the company overall is struggling for profitability.

Pure distributors, such as GameStop, which leads sales in America, Europe and Australia, would be at a disadvantage. Even with Gamestop’s rating strengths, will have trouble in mobile game downloads until demonstrating command of Chinese and local game consumer tastes. Which is why it has, to date, been noticeably absent from Asia.

Another media firm, Los Angeles based j2 Global, owns IGN (San Francisco based)—a respected rater of games with Chinese and Japanese language translation capability—but IGN has not expanded aggressively in China’s game market. Its parent’s focus has instead been business cloud services for digital media.

Strategic investors in the game and entertainment space might prepare themselves for role reversal in their home markets. Already in 2011, Tencent invested US$400 million in Riot Games which made League of Legends. In June 2012, Tencent bought a minority position in Epic Games, maker of Gears of War.

Another Chinese gaming firm chose an organic approach to growth abroad. In February 2015, NetEase established a North American headquarters in Silicon Valley’s Redwood Shores. It will be releasing a Chinese game, Speedy Ninja, rewritten for release in the West.

With the advent of dynamic Chinese mobile gaming firms in the West, what might be left for Western firms to consider in China? Actually, there is plenty to consider. As demonstrated by Chinese non-game developers who are aggregating and distributing mobile games (SkyMobi, Qihu) there is opportunity in targeting the gamer. US-based Millennialmedia identified games as the leading mobile application category with the largest number of impressions in 2014, ahead of music, productivity tools, communications, dating, news, weather, health and books. Mobile gaming isn’t just about gaming; it’s reaching a rising generation of consumers in China. That’s a giant cross-selling opportunity for Western advertisers, service and strategic firms.

Since its establishment in 1992, Dezan Shira & Associates has guided foreign clients through South China and Asia’s complex regulatory environment, assisting with legal, accounting, tax, internal control, HR, payroll and audit matters. As one of the most experienced and longest established practices in the Pearl River Delta with over 70 professionals well versed in practical China knowledge, we are your reliable partner for business expansion in this region and beyond.

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