Time again to dive into vital gaming trends of the Chinese gaming industry.
Through the first half of the year 2018, the China game market grew at a rate of 5.2% (1). By the end of 2018, the growth became more limited (2). Studying these data points, many people mistakenly believed that the Chinese game market had entered a period of decline, and that strict new government regulations would eventually strangle the “golden goose,” so to speak.
For a time, such opinions appeared to be proven correct, particularly since the semi-annual and annual rates of market growth for the gaming market in China in 2018 slowed to its lowest rate recorded over the past decade.
However, my personal point-of-view had remained optimistic during that time. I counter-intuitively predicted that the licensing restrictions in China would force Chinese game companies to innovate and expand in healthy directions (1).
To bear this point out, Gamma Data recently released their 2019 Semi-Annual Report of the China Game Industry, which essentially supports my assertions (3).
The report shows that the actual revenue from the China game market in the first half of 2019 was 16.6 billion USD. The rate of growth soared from 5.2% to 10.8% over the corresponding period from last year.
Actual Revenue of China Game Market
Chinese mobile games, the most important and popular type of game, skyrocketed in revenue over the first half of 2019. Looking at the aggregate revenue of the mobile game market in China, we see an increase of a whopping 18.8% compared to last year, exceeding 10 billion USD. Growth from the corresponding period of last year came to 12.9%. Annual revenue in 2019 is expected to reach 21.3 billion USD. These statistics put an end to the idea that the game industry in China is stagnating or declining.
Actual Revenue of China Mobile Game Market
Actual Revenue of China PC Game Market
Even the PC game industry in China made a turn for the better in the first half of 2019, increasing 2.3%. Even though the growth is only slight, the upward trend is a good omen for the longer term future.
Even the sheer size of the Chinese gaming market increased to a three year peak, attracting 554 *MILLION* gamers through the first half of 2019. This reflects a 5.1% growth in the user base when compared to the corresponding period from last year.
China Game User Base
Age Structure of China Game Users
Gender Structure of China Game Users
As predicted, Chinese game studios aggressively expanded overseas as another means of adapting to their regulatory environment. Games that were developed domestically soared in overseas actual revenue, generating 5.7 billion USD in the first half of 2019. This impressive performance reflects an accelerating growth rate of 23.8% compared to a 16% increase earned over the same period last year. Penetration by Chinese game studios into Western and Japanese/Korean game markets contributed the most to this increase of overseas revenue earned by games developed in China.
Overseas Actual Revenue of China Domestic Developed Game
Overseas Revenue of China Domestic Developed Game by Region
As born out in my past articles, the Chinese game industry is here to stay. They will continue to innovate -- as necessary -- in order to survive, grow, and then expand in healthier directions. In particular, we will continue to see an acceleration by Chinese game companies to enter and thrive in overseas markets.
Like many things, new regulations upon the China game industry simply represent a new challenge. There have clearly been positive results. Meanwhile, the Chinese gaming market has regained its pent-up demand, and the user base is still climbing.
Although the growth rate of the Chinese mobile game market has been slowing over the past few years, game companies and game products from China are just now beginning to forge into overseas markets and seize market share.
As always, the quality of games developed in China continues to improve, which will only solidify their prospects in highly competitive foreign markets.
Readers should bear in mind a few key details when considering an expansion overseas. You can read my analysis of the situation here in this blog post (4).
As mentioned earlier, the Japanese, Korean, and Western gaming markets contributed the lion’s share of revenue growth in overseas revenue to Chinese game companies. Mostly untapped markets in the Middle East, Africa, Southeast Asia, and Latin America show great potential, boasting an average growth rate of 40% in 2018.
A vital point bears some emphasis. Maintaining game quality and high production values are keys to success in overseas gaming markets, especially in developed countries.
When compared to China’s game market, overseas game markets are dominated by centralized publishing platforms and mature development/operating processes. In such business environments, the success of a game often depends more on sheer quality. That being said, Chinese domestic games continue to make impressive strides in quality and this is reflected in their continual improvement in their overseas market positions.
And so, the game industry in China is healthy and their overseas adventures and expansions are only serving to enhance their overall strength. The situation warms my heart.
In conclusion, the market shares of various Chinese game products are still relatively low in overseas gaming markets. But, these modern times present a unique business opportunity for China’s game companies to speed up their efforts to innovate and go overseas. The potential for rapid growth is real.
You can read more about the state of China’s game industry here (5). Meanwhile, let’s look forward to seeing the performance of the Chinese game market in the second half of 2019. More licensing issues should be resolved, and we’ll be able to see the fruit of further Chinese expansion into overseas gaming markets. The results will likely be impressive!
References:
Research Assistant: Vitani Shan
Editing: Philip Daay
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