Partly inspired by this Game Informer piece I read over the weekend, I wanted to do a quick write-up of some of the big themes I felt specific to the games industry in China this year.
Rise of the mobile core
For me the biggest thing (and I was certainly late in recognizing this, though I think it’s still not talked about enough in English gaming circles) is the rapid adoption of core PC genres by Chinese players. I only wrote about this recently (when the numbers became too obvious to ignore), but the Chinese dev/publisher efforts have been underway for at least the last few years.
To toss around some hyperbole:
- The most played and highest revenue MMO across any platform this year may well be Netease’s Fantasy Westward Journey 1;
- Tencent’s Crossfire Mobile only launched in December, but may already have more active players than CS:GO on Steam 2;
- and Tencent’s Kings of Glory MOBA has already bested Dota2 in terms of PCU barely a month after launch as well 3
Obviously all 3 data-points above enjoy the benefits of China’s huge market size / population numbers, but they are certainly still very relevant comparisons. Chinese devs have brute-force migrated their core PC genres to mobile and players have largely embraced them. The thing to look out for in 2016 is will these player-bases sustain – if so they will pose some real hard questions (innovator’s dilemma) for the respective PC titles 4.
Esports/streaming bubble continue to inflate
Somewhat similar to global investor trends, in 2015 China also saw continued investment interest in esports, both on the execution front (hot money flowing to teams / tournaments / related ecosystem players like streaming sites) but also on the “story-telling for the stock market” front in a roller-coaster year for the markets.
Wang Sicong’s esports / entertainment empire building continued with the rollout of his own streaming platform panda.tv, and the formation of Banana Culture which will be the operator of the 2016 LPL, amongst other things. He also recently signed a high profile sports announcer from CCTV, a number of Korean pop acts; and the PC cafe chain he owns a stake in is building esports-themed venues nationally.
He’s certainly not the only one; for example I’ve lost track of the number of .tv streaming platforms, and there’s been intense drama this year on the talent competition front (disputes over high profile streamers “breaking contract” to join competing platforms). Similarly, the rumored contracts/transfer fees of pro players continue to raise eye-brows, despite fairly lackluster results this year in various world championships.
On the “selling stories to stock market” front, start-ups / VCs / public companies seem to be eating up the esports concept and are ruthless in packaging it for boosting the valuations of whatever they are trying to sell. Companies with <$100MM annual revenue are getting multi-billion dollar public market valuations based on some esports related concept, despite having probably very little visibility with players or product control. (Better yet, make it “mobile esports”, which is all the rage currently.)
Now the hype cycle may still continue well into 2016, especially since the esports concept seems to be just getting started in the west, with the likes of celebrity investors such as Mark Cuban getting involved. But given the real-economy uncertainties in China I think there could be some quick boom / busts locally…
(If I sound frustrated or cynical about some of these developments – not really, this is really just business as usual in the “Wild East”. The games industry is not isolated from the macro-climate and a lot of this is just indicative of the broader economy.)
Console’s humble beginnings
China only recently removed the console ban, and Sony and Microsoft have been diligently seeding the market (I wrote about consoles a month ago).
In terms of competition, the early results indicate a landslide victory in favor of the PS4, with media reports of 410k units sold vs. XboxOne’s 90k units as of Dec 2015. However these numbers are certainly tiny compared to the player-base.
The big question, same as what I wrote previously, is about content. My working analogy is consoles in China is like Hollywood films a decade ago – there’s some promise, but the difficulties of operating are high (censorship / approval / quotas etc.). This will continue to be a push-pull relationship: some “questionable” content may be able to get past the reviews with enough government relationship building, and some content will be built in mind with the Chinese audience 5.
Additionally, there’s quite a number of local studios trying in earnest to fill the void – creating local console titles that can pass the government review – but the learning curve of building good console content may be high. On the flip side though, there are a pool of console devs in China, thanks to the local dev offices of big global developers such as 2K.
From the gamers’ perspective, a small but hardcore group of players will continue to be hungry for AAA console content, and with the popularity of social media / streaming some of these console franchises are starting to develop a small brand. So in sum, the trend is positive, but it’s really early days yet.
Steam’s (small) splash
In a somewhat similar vein, Steam has had a pretty good year in China, with the expansion of local pricing / payment support in November. (Even before then, China sales of some locally priced content like GTA5 were starting to show up in data analyses.) And within the local hardcore gamer community, it’s no longer a foreign concept to participate in Steam sales. In sum, they’ve had some good growth this year and some of the local prices generated excitement with players.
My personal understanding is that Steam is currently flying under the radar – they don’t have a on-shore presence, and certainly the vast majority (if not all) of their catalog of games have not gone through Chinese government approval. This means a generally degraded player-experience in terms of download speeds, but also the potential risk that they would be targeted by the government (e.g. if there’s a big PR scandal over some game on Steam, say angry parents complaining GTA5 was corrupting their kids). As a gamer, I would certainly not want that to happen, since Chinese players deserve to enjoy the same AAA experiences as players elsewhere.
- Chinese media recently reported 60MM cumulative registered players and PCU of 2.04MM in the 9 months since launch; my previous post quoted analyst estimates of $158MM monthly revenue in Nov 2015 ↩
- CS:GO PCU was around 800k; CF mobile announced 1MM PCU after 3 days of launch, and is rumored to have 10MM DAU ↩
- Kings of Glory announced 1MM PCU and 7.5MM DAU recently, while Dota2 PCU on Steam is 1MM ↩
- Disclaimer: including League of Legends, which I work on ↩
- just like the current Hollywood blockbusters that are bending over backwards to meet Chinese tastes, now that they see the size of the market ↩