Chinese games industry shrinks for the first time in years •

by Ana Lopez

In the past decade, China’s gaming industry has experienced explosive growth, overtaken the US in market size and gave rise to global publishing giants such as Tencent and NetEase. The boom is partly caused by a population that quickly came online and gained purchasing power. But the heyday has come to an end as the market approaches saturation and consumers pull their wallets amid economic headwinds.

China’s video games sector posted a revenue decline for the first time since at least 2008, according to previous reports from the country’s top gaming industry association. The market brought in 265.9 billion yuan ($39 billion) from video game sales in 2022, down 10.33% year-over-year, according to a new report Released by the association on Tuesday. The total user size shrank to 664 million, 0.33% less than the year before.

China’s 2008-2018 game sales published by the country’s top game industry association. Link to report.

China’s game sales from 20014-2022 published by the country’s top game industry association. Link to report.

The declines added pressure to an industry that was already struggling. In recent years, China has launched a large number of crackdowns on video games, content that is ideologically objectionable and restricts the playing time of underage users. Amid the industry turmoil, regulators stopped issuing new game permits for months; the process has resumed, but now takes longer and costs companies more to be compliant.

To create new growth opportunities, developers from shoddy studios to giants like Tencent are going abroad. Chinese games have been exported for years, but lately they’ve started to make a dent in the West. By the end of 2020, Chinese-made titles accounted for a whopping 20% ​​of mobile game revenue in the US, according to market research firm Sensor Tower. Last July, 39 of the top 100 mobile games in worldwide sales came from Chinese companies.

In reality, the ratio could be even higher, as Chinese game developers, like other types of Internet services, increasingly try to obscure their origins to avoid being labeled as “Chinese”. For example, India has banned hundreds of Chinese apps in recent years, including global hit PUBG Mobile, as relations with China deteriorated.

Regardless, made-in-China games had another rosy year in 2022, with sales of $17.3 billion overseas, according to the industry report. Although the figure fell 3.7% year-on-year, the decline was much less than that of domestic sales.

China has a reputation for making lucrative, addictive mobile games, but the gaming giants are now ambitious in developing high-budget global hits that will stand the test of time. Tencent, the world’s largest game company by revenue, has a AAA console game in the works at its Lightspeed outpost in Los Angeles (Lightspeed is best known for coming up with the mobile version of PUBG). Tencent’s nemesis NetEase is also setting up shop abroad. After announcing its first US office in Austen last May, the company recently teased another new studio.

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