China Resumed Game Licenses, while Companies Rush Overseas

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China Resumed Game Licenses, while Companies Rush Overseas

According to the National Press and Publication Administration (NPPA), 45, 60, 67, and 69 game licenses were approved on April 11, June 7, July 12, and August 1, respectively, for 241 licenses. This shows that in the first half of 2022, the policy pressure on the game industry has been released, and the issuance of licenses has gradually returned to normal. Tencent and NetEase, the country's two major game giants, have yet to obtain a new license since the window is reopened.

Background

In order to launch a new game in China, companies must apply for and obtain a license from NPPA, but the department has stopped granting such licenses since July 2021.

China's gaming industry has already experienced a seven-month licensing freeze in 2018. On March 29, 2018, the former State Administration of Press, Publication, Radio, Film, and Television issued a Notice on Important Matters related to the Application and Approval of Games, saying that the progress of the approval of games would be affected due to the institutional reform.

In 2021, game licenses were suspended without prior announcement and recovery time. The sudden suspension once again threw the game industry into a cold winter. Many game companies have had to cut projects and lay off staff in order to lower costs. Share prices of most Chinese game companies also drop dramatically.

Going Global

The gaming industry is increasingly regulated. While many weak and small game companies have closed down one after another, they have also ensured the order and quality of the game market from the side. Industry insiders said that with the gradual increase in the barriers to the gaming industry, the market is at the point of survival of the fittest. At the same time, strengthening the supervision of domestic game licensing has accelerated the overseas development of Chinese game companies.

According to Sensor Tower, there are 42 Chinese mobile games that each earned more than $100 million in overseas markets in 2021, five more than in 2020. The total revenue of the top 30 oversea mobile games generated from Apple store and Google play reached $11.5 billion, up 24% from $9.24 billion in 2020. Tencent's financial report shows their overseas game revenue reached ¥45.5 billion ($7.1 billion) in 2021, up 31% year on year, accounting for 26% of the company's total game revenue. In terms of the overseas revenue source market of Chinese mobile games in the past three years, the United States and Japan are still the top two destinations.

Competition is intensifying sharply as more Chinese players flock to overseas markets. Although Tencent and NetEase have not been granted new licenses in the short term, this may limit the development of these giants in the domestic market. However, with the encouragement of relevant policies and the excellent resources and capabilities of Tencent and NetEase, there will be more advantages in expanding overseas business.

Source: NPPA, 163, Tencent, Chinabreifing, TechNode

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