Market Insight

ChinaJoy: Seeking opportunities in the face of strict censorship

August 07, 2018

Chenyu Cui Chenyu Cui Senior Research Analyst – Games, IHS Markit

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Government regulations cast shadow on the growth of the market

The Chinese PC online-gaming market experienced a minor yearly increase of 3.2% in 2017, and that growth was entirely driven by Tencent’s legacy titles and Kingsoft’s JX 3 series. The PC games business of other major publishers suffered significant decline. PUBG, meanwhile managed to sell 17 million copies in China via Steam even before the game had been officially launched in the country, highlighting how battle-royale games have replaced MOBA in terms of market attention and industry investment. Tencent's launch of PUBG in China, however, is facing major hurdles of censorship, meaning that the company is instead focussing on Fortnite.

We've seen few new PC games presented during ChinaJoy this year, with traditional PC publishers instead giving fresh life to legacy IP via esports or anime/film adaptations. One of the main reasons for this is the increasing difficulty in clearing publishing authorisation from SAPPRFT. Due to structural changes of the organisation in March, the authorisation of materials received from gaming companies is currently suspended. Although some titles have secured approval from the Ministry of Culture, they still need to wait for authorisation from SAPPRFT to start commercial launch. This won't hamper beta-testing phases, but will prevent publishers from generating revenue from new titles.

Tencent exhibited Monster Hunter: World and Fortnite during ChinaJoy, illustrating the company’s focus in H2 2018. Although they have passed the censorship process, neither title has yet received publishing clearance. Tencent initiated beta testing for Fortnite and has received good feedback from users, but it cannot start monetization for the game, which increases profit-margin pressure on the company.

Due to a lack of opportunity for getting their new games authorised, mid- and small tier developers are seeking opportunities in overseas markets, which means they have to adjust content to better attract such non-domestic player bases. And as more developers aim at overseas markets, so do the challenges grow when it comes to competing for distribution channels and publishing partners.

Live streaming plays key role to attract gamers

With the soaring popularity of esports in China, live-streaming portals established a large stage presence during ChinaJoy. Unlike Huya and Douyu, which focus on esports live-streaming, Chushou TV, XiGua and Panda TV focus more on casual games and pan-entertainment coverage, to cultivate a larger user base. They generate revenues from introducing a ‘tips’ system, where viewers can make direct payments to show appreciation of any streamers, as they are watching.

These live streaming platforms have become essential channels for connecting with gamers, including for publishers looking to promote their games via partnership with popular streamers, bringing China in line with the social-video trend that's been taking place in the west over the past five years. Additionally, live streaming portals have become important user acquisition channels for publishers.

Below are a few pictures taken by our analysts at the event:

Geography
China
Organization
Tencent
Research by Market
Media & Advertising
Category
Games
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