Is China starting to play video games again?
Tencent Holdings and NetEase, two of China's largest video game developers, have received new licenses to launch paid titles. Is Beijing restarting the internal video game market after the continuous tightening?
It is a love-hate relationship between the Chinese Communist Party and the video game market. While the software houses of the Dragon are conquering the global market, which until now had been in the hands of Japanese and US development houses (to the most capitalized brands, which we will scroll through below, there are also names hitherto unknown even to experts in the sector, such as Chinese company miHoYo which with its Genshin Impact is making an unexpected fortune), at home the government wages a close fight against the phenomenon. We all remember that, last year, the Economic Information Daily , a Chinese newspaper affiliated with the official Xinhua news agency, the government house organ, compared video games to "opium of the spirit" calling them "electronic drugs".
SO CHINA HAS CRISED THE VIDEO GAMES SECTOR
That day, Tencent left 10.57% on the pitch in Hong Kong, while its main opponent, NetEase, 15.7%. A stampede of shareholders that had its own raison d'etre: soon rules would be enacted that would have caused the closure of about 14 thousand Chinese development studios. Two moves by the government to reduce what is seen as a mass distraction problem, namely the addiction of young people to the Internet and video games (a problem that, according to government data, is lowering grades in schools and university performance) : on the one hand the imposition on minors of precise hours for video games, on the other hand the closure of the channels through which the party grants licenses, thus controlling the products that will end up on the market.
As for the first package of rules, "for an effective prevention of the dependence of minors on online games" in order, the official media reported, "to address the problem of excessive use by minors of online games", the the body in charge, or the National Press and Publication Administration, has launched a calendar that all minors must comply with: online video games prohibited at night, possible games for up to three hours a week (which are significantly increased during holidays) and in any case never after 10pm. Because, you know, after Carosello all to bed. Where the common sense of families does not reach, the Beijing trap is triggered. A trap that is obviously possible thanks to the scaffolding that the government had already prepared to control Chinese internet users: the Internet is accessed only through digital identity and in some cases the software also checks biometric data, such as fingerprints and face scans. , to prevent the most crafty minors from stealing the credentials of mom and dad.
MORE THAN 14,000 CHINESE SOFTWARE HOUSES DISAPPEARED IN A FEW MONTHS
The reduction in hours of online gaming has naturally led to a serious decrease in business, for Chinese software houses, but to have caused the death of 14 thousand studies and serious economic damage to the already established giants (starting with Tencent ) was above all the blockade of licenses for sale. It is not the first time that the Communist Party has moved in this direction: throughout the first decade of 2000, when China was in full economic boom, the demand for new car registrations was such that the government began to ban auctions, more like lotteries, and only those who managed to win them won, at a very high price, the coveted license plate.
The diffusion of new video games is regulated in a similar way: the government of China grants tot licenses per year and obviously also checks the contents, in order to control the number of titles arriving as well as the content of the same. In recent months, the National Press and Publication Administration has tightened its links by damaging many companies that were investing thousands of yuan for titles that could not have been released or that would have missed the launch window agreed with manufacturers and distributors. The smaller studios have gone bankrupt, the larger ones are still licking their wounds. Even Tencent, a public company founded in 1998 and chaired by Ma Huateng , whose subsidiaries provide the most varied services in the fields of entertainment, mass media, internet and mobile phones, experienced a first, historic, decline in revenues.
Since the Chinese giant entered the video game sector, it has come to dominate it: in 2021, also thanks to brands for casual gamers much loved by those who play on smartphones such as PUBG, Valorant, Brawl Stars and Clash of Clans, it earned 32.94 billions of dollars, far exceeding the Japanese Sony, which has been active in the gaming sector for about 30 years.
LATEST TENCENT PURCHASES AMONG THE WESTERN VIDEO GAME DEVELOPERS
Bound at home by rules that do not allow it to do business, Tencent has for some time turned its attention to the Western market, free from censorship and ties. And he put it in his sights by shopping for existing labels present in the sector. For years, for example, the Chinese giant has wanted Ubisoft , a French multinational with studios now all over the world, from Milan to China, passing through Abu Dhabi, with IPs such as Prince of Persia, Rayman, Assassin's Creed, Far Cry, Rainbow Six and Just Dance , just to mention the best known titles.
The financial results of the French label in the last period have not been excellent, so much so as to cause the postponement of several video games and a strong squeeze in the expenses of the various branches and so Tencent in recent weeks has made up again with the Guillemot family , which with 15% hold the keys to the company. According to Reuters, the Asian giant that has already bought a 5% stake in Ubisoft in 2018 would have again expressed interest in increasing its stakes in the company by the current value of 5.3 billion dollars, aiming to become the majority shareholder. To be precise, he would have put 297.3 million dollars on the table. The agreement would imply a valuation of 80 euros per share for Ubisoft, which is significantly higher than the market price of the last period of 40 euros.
In the meantime, Tencent has carried out full acquisitions, shopping for software houses such as Inflexion Games , an Edmonton, Canada-based label made up of former BioWare members, starting with CEO Aaryn Flynn , who has signed successful sagas of the caliber of : Mass Effect, Dragon Age and Star Wars: The Old Republic and PlayTonic, which instead consists of former Rare (British software house that in the 90s signed masterpieces such as Donkey Kong Country, 007 GoldenEye, Perfect Dark, Banjo-Kazooie) , downsized in talent after the purchase by Microsoft, although in recent times it has churned out the fun Sea of Thieves.
In PlayTonic we find former Rares such as Gavin Price (head of the company), Chris Sutherland (main programmer of Donkey Kong Country ) and Steve Mayles. The Chinese investment will allow the British to develop a third chapter of their Yooka-Laylee, a 3D platformer that blatantly refers to one of the most popular video games of the vintage Nintendo 64 Rare: Banjo-Kazooie .
At the end of August 2022, Sony and Tencent then increased their respective stakes in FromSoftware , the Japanese developer of the award-winning Elden Ring (which, despite being an exclusive PS5, console still difficult to find due to the absence of chips , has sold over 16.6 million copies worldwide) and other soulslike titles. Sony now holds 14.09% of the software house, while Tencent, through its subsidiary Sixjoy, has risen to 16.25%. Kadokawa Corporation, the parent company of FromSoftware, now owns 69.66%.
THE NEW CLOUD CONSOLE
The news of the partnership between Logitech G and Tencent Games aimed at creating a portable console entirely based on cloud gaming and which will support multiple services that take advantage of this technology, including Xbox Game Pass, has passed over in silence, given that it was disclosed in the middle of August. and Nvidia GeForce Now.
THE CHARGE OF THE CHINESE
And, as anticipated, Tencent Games is not the only software house on the market. Other big names are NetEase, which has in its portfolio titles such as Knives Out, LifeAfter and The Lord of the Rings: Rise to War , ByteDance, which has not only TikTok (it has also recently acquired one of the largest Chinese private hospital chains, Amcare Healthcare, for $ 1.5 billion), the arrembante miHoYo that gave birth to a free-to-play action RPG backed by in-game micro-transactions (which in China have been banned for minors) and Chengdu Lingze Technology Co., Ltd. working on the promising Wuchang: Fallen Feathers (also developed by a Chinese software house, Leenzee Games). And that's just the tip of the iceberg, because the list is endless.
IS CHINA RESUMING PLAYING VIDEO GAMES?
But something is about to change. According to reports from the Wall Street Journal , in fact, Tencent Holdings and NetEase have obtained the authorization to launch new paid games. This is the first imprimatur to arrive since July last year, a sign that Beijing is easing a two-year crackdown on the technology sector. In fact, Beijing had started granting new authorizations in April, after an eight-month forced hiatus, but neither license had ended up with the two giants in the sector.
It is not certain whether this attitude was to be considered punitive or, more cynically, it was considered that the two big names had broad enough shoulders to withstand some other period of "apnea". Between April and August, China's gaming regulators granted 241 authorizations for new video game titles to secondary software houses. Now, the National Press and Publication Administration has granted publishing licenses for 73 online games, including 69 mobile games. Other developers also involved, including Zhong Qing Bao, Leiting, XD Inc and CMGE Technology Group. In short, China is getting closer to video games, but considering the high number of software houses present, the licenses are still too few to allow the market to restart without a high number of failures.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/la-cina-riprende-a-giochicchiare-coi-videogiochi/ on Wed, 14 Sep 2022 13:18:34 +0000.