London Daily

Focus on the big picture.

‘Spiritual opium’ no more: hopes rise for good 2023 as China issues game licences

‘Spiritual opium’ no more: hopes rise for good 2023 as China issues game licences

End of year licence approvals has stirred optimism in some quarters that China’s video game industry will stage a comeback in 2023.
China’s video gaming companies led by Tencent Holdings and NetEase, battered by an economic downturn, shrinking user base and regulatory woes, had a good end of year as Beijing doled out a batch of new game licences, raising investor hopes for a fruitful 2023.

The National Press and Publication Administration (NPPA), the agency responsible for licensing video games in China, granted 84 new games to domestic developers in December, the largest batch of the year. It also gave the nod to 44 imported games – the first such approvals for 18 months.

The 128 game approvals cover a number of long-awaited imported games such as Valorant by Riot Games, a shooting title that will be brought to China players by Tencent, lifting morale in an embattled gaming industry and signalling that the worst may be over.

In total, China approved 512 games in 2022, including 468 domestic games and 44 imported games. That is still just two thirds of the amount approved in 2021, which included 679 domestic games and 76 imported games, and less than 40 per cent of the amount in 2020.

Tencent Holdings and NetEase, China’s two largest gaming companies, secured eight and five licences in the year, respectively, down from nine and 12 in 2021. However, not all analysts ascribe the domestic industry’s troubles to licence approval limits alone.

“China’s video gaming industry [still] lacks really innovative products,” said Zhang Shule, a researcher at Beijing-based research institute Kandong. The lack of exciting new titles has partly contributed to market weakness with foreign titles often used to stir a reaction in the domestic market, he said.

China halted the process of approving new games last July and has maintained a tight grip on online content. The government has also strictly enforced playing time restrictions for minors, enacted last August to clamp down on video gaming addiction. Under the rules, people under age 18 cannot play online games for more than three hours a week.

However, according to recent state media articles, there has now been a change in tone coming from the top, with Beijing now viewing the industry as an important business instead of “spiritual opium”.

The People’s Daily, the Chinese Communist Party’s mouthpiece, called video gaming an industry of “great significance to the country’s industrial layout and technological innovation” in a November editorial while China’s semi-official gaming industry association recently said that the “gaming addiction problem” among minors has been “basically solved”.

There has been a steady increase in approvals. The NPPA gave out 45 licences in April, which increased to 60 in June, 70 in September and 73 in November, despite dips in May and October. “In the long run, the trend is there for the gradual recovery of game licences,” said Zhang Yi, chief executive of iiMedia Research.

In China, gaming companies must obtain a licence from the NPPA before they publish games on smartphones, consoles and personal computers, and make money from them. The process can take months, if not years, and the regulator is not allowed to give advance notice of titles to be approved.

Pony Ma Huateng, founder and chief executive of Tencent which runs the world’s largest video gaming business by revenue, warned company employees in an internal town hall meeting in December that its video gaming division will continue to live under a stringent regulatory environment. Ma expects regulators to keep a tight lid on new game approvals in the long run.

This view is shared by iiMedia’s Zhang, who also noted “the method of regulating the market through controlling the number of new game licences is likely to become the norm”.

But others disagree, and Yang Aili, an analyst at CSC Financial, says a brighter future is just around the corner. “The trend of policy recovery is clear… we expect the release pace of game licences in 2023 to return to stability,” wrote Yang in a research report last week.

Whatever the policy outlook, it is clear that video gaming companies will need to work hard to turn the situation around.

In the third quarter, total sales in the Chinese video gaming market slid 19.1 per cent to to 59.7 billion yuan (US$8.65 billion) amid a slowing domestic economy and ongoing regulatory scrutiny, with mobile game sales plunging nearly 25 per cent year on year, the lowest since the start of the Covid-19 pandemic in 2020, according to a report by Chinese video gaming intelligence firm CNG.

Even for Tencent, which secured six licences in the latest batch of approvals including Pokémon Unite by The Pokémon Company and TiMi Studio Group, the financial urgency is clear. The gaming giant said its two biggest cash cows in video games – Honour of Kings and PUBG Mobile – both saw their revenue fall in China during the third quarter, as the company’s domestic game revenue fell 7 per cent to 31.2 billion yuan.

“[Tencent Games] must focus on high-quality products, and not waste any opportunity for a single licence,” Pony Ma was quoted as saying recently by several domestic media outlets.
Newsletter

Related Articles

London Daily
0:00
0:00
Close
Russia's Electronic Warfare Neutralizes Western Weapons in Ukraine
Trump Challenges Biden to Debate and Golf Match
Macron Accuses Israeli Minister of Election Interference
US Senator Highlights Weaknesses in Western Military Industry During Ukraine Conflict
George Clooney Urges Biden to Withdraw from Presidential Race
Political Shift in the UK: A Detailed Analysis of Labour's Victory and Future Prospects
Viktor Orbán's Peace Mission: A Diplomatic Controversy in the EU
India Advocates Peace and Prosperity: PM Modi's Speech in Austria
New UK PM Keir Starmer Reaffirms Strong Support for Ukraine at NATO Summit
Spain PM Pedro Sanchez Denounces Double Standards on Gaza at NATO Summit
UK Police Arrest Suspect in Crossbow Attack After Three Women Killed
Sunita Williams Safe on ISS, to Address Earth on July 10
Biden Affirms Commitment To Presidential Race
France Faces Political Turmoil and Airport Strikes Ahead of Paris Olympics 2024
Putin Hosts PM Modi for a Private Meeting
TSMC: The Taiwanese Chip Giant Valued Over $1 Trillion
Boeing Pleads Guilty Over 737 MAX Crashes
2024 Predicted to Be World's Hottest Year
Iran's President-Elect Masoud Pezeshkian Reiterates Support for Hezbollah
White House Denies Biden Being Treated for Parkinson's Disease
Biden to Meet New UK Prime Minister Keir Starmer
Biden Insists on Continuing Presidential Race Amid Criticism
UK Defence Minister Pledges Enhanced Support to Ukraine
French Prime Minister Gabriel Attal Resigns After Election Setback
Macron Faces New Political Challenges Despite Election Relief
France's Far-Right Falls Short in Parliamentary Elections
Key Figures in France's Left-Wing New Popular Front Bloc
England Reaches Euro 2024 Semifinals After Penalty Shootout Win
Rishi Sunak Apologizes After Historic Tory Defeat
Voter Discontent in Recent UK and French Elections
Trump was recorded attacking Biden: "I kicked the old pile of shit"
Understanding the MRP Method in UK Elections
US Officials Resign Over Biden's Gaza Policy
First-Time Immigrant Voters Aim to Influence UK Elections 2024
Reform UK Receives Major Donations from Brexit Campaign Group
Tata Steel Strike Called Off, Paving the Way for Crucial Talks
Sir Keir Starmer's Acceptance of Substantial Gifts from UK Donors
New Zealand Introduces Law to Make Tech Giants Pay for News
NASA Astronauts Stranded in Space Due to Boeing's Starliner Issues
OpenAI and Microsoft Sued for Copyright Infringement
Starmer Vows to Renegotiate Brexit Deal Amid Far-Right Rise in France
Monster Hurricane Beryl Hits Caribbean as Category Five Storm
EU Charges Meta with Breaching Antitrust Rules
Biden's Debate Performance Unites Democrats and Republicans
Prison Officer Faces Court Over Inmate Sex Video
Jude Bellingham's Iconic Euro 2024 Goal: A Historic Moment for England
Campaigners Push for Emergency Uplift Visa for Palestinians Escaping Gaza Conflict
French Elections: Battle to Thwart Far-Right Takeover
Supreme Court Grants Trump Partial Immunity, Delays Trial
China Criticizes US Restrictions on AI Investments
×