The EU SME Centre considers the growing gaming market in China and the possibilities for EU companies looking for a way to get in on the action. How to make your services appeal to Chinese users, while abiding by the evolving government guidelines and preventing others from hijacking your product and designs….
Computer games are extremely popular among China’s youth, with about 150 million playing PC games and 192 mobile gamers today (some estimate the number of online game users to be as high as 265 million). The popularity of these platforms is partially the result of a ban on consoles since 2000, ostensibly to address the public’s concern with gaming addiction, which was only lifted in early-2014. Due to the ban the availability of consoles has been up-to-now confined to small retail outlets that have also been able to stock pirated console games with little risk of legal action due to their informal nature. The opening of the door to official console sales has sparked discussion of the huge potential this market presents, and understandably, given the impressive growth of gaming sales over the last 5 years – from RMB 20.78 billion (EUR 2.56 billion) in 2008 to RMB 60.28 billion (EUR 7.42 billion) in 2012. Additionally, the China Game Industry Report forecasts growth of 12.35% per year through to 2017 in this sector. However, on closer examination online gaming makes up more than 90% of the market and a good deal of this is built upon business models very different to that of conventional console-related sales.
Due to widespread piracy, the so-called ‘freemium’ model (also known as games-as-service) has emerged as the economically most viable option for developers. In this model, the basic product is given away for free and the service provider then makes money by charging for add-on services or features. Advertising within games is also regarded as a reliable way to generate revenue within the industry.
To be able to enter the market, Western developers need to be aware of and strictly abide by the rules to protect minors from ‘unwholesome’ content, set and frequently adjusted by China’s Ministry of Culture and relating mostly to violent and sexual content. A recent case in point is the game ‘Battlefield 4’ that received a blanket ban, encompassing even related downloadable materials and add-ons, for including China very prominently, and potentially negatively, in the games story. ‘Deep culturalisation’ is another prerequisite, as simply translating a game into Chinese will not suffice to attract highly demanding users – it may be necessary to entirely change a script and hire professional Chinese actors for voiceovers.
As many Western distribution and marketing platforms are blocked in China, expertise in the country’s online landscape will also be necessary to successfully attract new users. Integrating Chinese social media is essential for both word of mouth advertising and creating online communities for a game, and providing your game through China-hosted servers will ensure a smooth gaming experience for users. Perhaps most fundamental though is choosing the right distribution channels. Whereas in Europe an Android-based mobile game may be successfully distributed through Amazon and Google stores alone, in China it might be necessary to list the game on more than ten online stores to make a sufficient impact.
However, there are still significant IP risks in the freemium business model. Not least, as the visual design is an essential component of a games appeal, and copying such elements does not necessarily require any ‘inside’ information. So the infringement of trade marks and copyrighted design elements should be a key consideration. It is also essential to fully protect the online identity of a game title by registering all available web domain names, to prevent others from capitalising on its popularity or ‘cybersquatting’: registering a domain name in bad faith in order to it sell back to the rightful owner at a profit.
To find out more about the essentials of protecting gaming software, see the China IPR SME Helpdesk Guide to IPR Protection in China for the Creative Industries, Guide for IPR considerations for ICT businesses, and Guide to Protection of Online IPR in China.
Also see the webinar, Cultural and Creative industries in China: Computer games and software development.