Over the past decade, the Chinese game industry has grown at an explosive pace, surpassing the competitive US market in size and giving a strong boost to the growth of world-class game publishers like Tencent and NetEase. The boom in the industry was largely due to the increase in the availability of the Internet and purchasing power in the Middle Kingdom, but now the situation is starting to change for the worse against the backdrop of a recession in the global economy.
The video game sector in China is also experiencing a decline for the first time since at least 2008, according to data from a local association that unites participants in the gaming industry. Industry sales revenue was $39 billion in 2022, down 10.33% year-on-year. The number of users decreased by 0.33% to 664 million people.
The downturn in the market has only increased pressure on an industry that has suffered in recent years from restrictions imposed by the authorities — banning content and reducing the amount of time allowed for underage gaming. In addition, regulators stopped issuing licenses for new games for months. Although permits have now resumed, they are taking longer and applications must meet more complex criteria than before.
In order to regain growth opportunities, developers from small studios to giants like Tencent are expanding their businesses overseas. While Chinese-designed games have been exported for years, it’s only recently that they’ve begun to gain a significant audience share in the West. According to experts from Sensor Tower, as early as the end of 2020, Chinese-developed games accounted for 20% of all mobile gaming industry revenue in the United States. Last year, 39 of the top 100 mobile games in the world were made in China.
In fact, the ratio in favor of Chinese developers may be even greater, since gaming businesses from the Middle Kingdom, like many other online services, often try to hide their origin in order to avoid negative consequences in the international market. For example, the global hit PUBG Mobile and hundreds of other applications are banned in India due to the cooling of relations between the two countries.
Nevertheless, for Chinese-developed games in the global market, 2022 turned out to be a very favorable year, with sales outside of China amounting to $17.3 billion. Although they fell by 3.7% year-on-year, the decline was much less noticeable than in China itself.
While Chinese developers are renowned for creating compelling, popular mobile games, the local gaming giants are targeting the market for big-budget global hits that will stand the test of time. Tencent, the world’s largest gaming company by revenue, is now developing an AAA-grade console game in its Lightspeed & Quantum Studio based in Los Angeles — this branch is best known for the development of PUBG Mobile.
Tencent’s competitor, Chinese NetEase, is also engaged in the creation and development of branches abroad. In particular, last May she opened the first branch in the United States, and recently released information about the opening of another studio.
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