Console games set to lift off in Chinese market

Showgirls perform during the 2014 China Digital Entertainment Expo and Conference in Shanghai on Thursday. Game developers are showcasing their products at the expo. [Photo/China Daily]

Now that the 14-year ban on game consoles has been lifted, the floodgates are open for a number of the world's leading game console providers to pour into the Chinese market.

Approval for the production and sales of game consoles has been one of the highest-profile developments in the China (Shanghai) Pilot Free Trade Zone, which was launched in September last year. The two giants in the game console world, Sony Corp and Microsoft Corp, successively announced the release of their most celebrated devices this summer.

Together with A-share listed Oriental Pearl Group based in Shanghai, Sony announced in late May that they will set up two joint ventures in the FTZ for the production, sale, research and development of the hardware and software for Sony's best-seller PlayStation consoles.

Just over a month later, Soeda Takehito, head of the China strategy department at Sony Computer Entertainment, said that some parts of the PlayStation console hardware will be manufactured in the facility located in the FTZ. The consoles will mainly provide Chinese versions of the original games, while local games await development and promotion.

On Wednesday, Microsoft announced the launch of its Xbox One console on Sept 23. The launch comes less than 10 months after Microsoft set up a joint venture with the Shanghai-based electronic manufacturer BesTV Network Technology Development Co Ltd in the FTZ.

The console without the Kinect motion detection system is priced at 3,699 yuan ($599) and 4,299 yuan with Kinect included.

The price, according to Li Wen, vice-president of BesTV, is much lower than expected by a large number of players.

"In the North American market, video games, or console games, take up about 57 percent of the entire gaming market, the largest part among all sectors, while the figure is 51 percent in Europe. However, the figure is zero at present in China, which gives us the confidence to believe that the market will soon lift off here. The output value of console games will soon reach 200 billion yuan in the next few years," said Li.

Statistics provided by the international market research and consulting firm Newzoo BV show more than 1.2 billion console game players in the world. The income from console games accounts for 43 percent of the total $70.4 billion income of the global gaming industry.

The Chinese market has also responded quickly.

According to Xie Enwei, general manager of Microsoft's greater China region, more than 9,000 Chinese game developers have contacted the company in the past four months with the aim of launching their games on the Xbox console.

Microsoft has looked far beyond that. Apart from setting up two studios－in China in the hope of bringing the best games from overseas and providing local games－entertainment, fitness and online education programs are being researched for future provision on the Xbox consoles sold in China.

Microsoft's plan in China is definitely a better practice, according to Shirley Lin, vice-president of the mobile marketing company YeahMobi, which is a subsidiary of the US NDP Media Corp. The market is huge－the output of the Chinese gaming industry amounted to 13 billion yuan last year, excluding console games, and China surpassed the United States to become the No 1 buyer of new TV sets in 2013. But a global market leader such as Microsoft should tread carefully with regard to a number of issues including game content, which was a major reason for the ban 14 years ago.

"It is crucial for overseas companies coming into China to locate the right content partners that have been granted IP licenses and have loyal audiences," Lin said. Only in this way can the console providers find the right channels of distribution and localize their games.

"The pie is big, but chewing is challenging," said Lin. "China is a large addressable market. The hunger for superb quality games is only increasing, never reducing. We are now glad to see that the black market has come into the light."

With the availability of these overseas game consoles, the Chinese market players will soon come up with their versions of consoles so that the devices will become more affordable, she added.