China Set To Become Gaming Giant

China has overtaken the US in game revenues, as the nation's consumers are increasingly willing to pay for online entertainment content, according to a report issued by London-based venture capital firm Atomico on Thursday.

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Last year, more than 600 million game players in China spent more on games than in any other markets, generating $24.6 billion out of the industry’s $101.1 billion global market value, said the report. By contrast, $24.1 billion came from the US market.

Jarosław pashaBiceps Jarząbkowski, a Polish professional Counter-Strike: Global Offensive gamer, who currently plays for Virtus.pro.
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An annual analysis report issued Wednesday (US time) by Mary Meeker, a US Internet analyst and a partner in venture capital firm Kleiner Perkins Caufield & Byers (KPCB), also found that China surpassed the US to become the world’s largest gaming market by revenue last year.

Citing data from Amsterdam-headquartered research house Newzoo, Meeker’s report said that China will continue leading the global gaming market in 2017, with its game software revenue set to reach $27.5 billion, while the sum generated in the US market is expected to reach $25 billion.

Meeker and domestic analysts attributed the rise of China’s gaming industry to the country’s large population base, booming mobile Internet  and consumers’ growing acceptance of paid-for entertainment content.

An Iranian woman uses a mobile phone next to a stock market activity board at the stock exchange in the capital Tehran on July 27, 2015
© AFP 2017/ BEHROUZ MEHRI

Meeker’s report said that China’s Internet sector has entered an entertainment golden age.

Buoyed by activities such as online shopping and games, the country has seen the number of its mobile users surpass 700 million in 2016, up 12 percent year-on-year, according to the KPCB report.

“People’s demand for online and mobile games is strong in China, even at a time when the economy is gloomy,” Ma Jihua, an analyst with Beijing Daojing Consultant Co, told the Global Times Thursday.

And Chinese consumers are also increasingly willing to pay for games, live-streaming services and video content, which Ma said was facilitated by the rise of convenient mobile payment tools.

KPCB’s report said that China’s mobile payment volume hit more than $5 trillion last year, twice the figure registered in 2015.

“China’s game industry will maintain double-digit growth at least in the next two to three years, because further penetration of mobile Internet services into third- and fourth-tier cities will be a new driver for the industry,” Xue Yongfeng, an industry analyst with Beijing-based market consultancy Analysys International, told the Global Times Thursday.

Therefore, in terms of revenues, China is likely to stay ahead of the North American market, where the game industry has matured and stagnated, said Xue.

It is not surprising for China to show such strength in the game industry, in the view of Tom Wehmeier, head of research at Atomico.

“After all, this country is home to the [game] industry’s most valuable companies,” Wehmeier wrote in a post on Atomico’s website on Thursday.

As of March 31, 2017, the total value of listed game companies in China reached $338 billion, accounting for 72 percent of the global total, according to Atomico’s report.

Tencent Holdings and NetEase Inc are China’s major online gaming players. Tencent’s multiplayer battle game Honour of Kings is the world’s No.1 mobile game in terms of downloads on the iOS App store and was ranked No.3 globally by revenue in the first quarter of 2017, according to a report issued by Sensor Tower Store Intelligence

The game’s success helped push Tencent’s first-quarter revenue up 55 percent to 49.6 billion yuan ($7.3 billion).

But despite their success at home, it is still hard for China’s game developing firms such as Tencent to compete with international counterparts in the console games segment, said the analysts.

The development of console games requires good design strategy and high picture processing technology, and Chinese firms are still weak in these areas, said Xue. “But when it comes to mobile games, Chinese firms can match or even surpass their US and Japanese peers.”

This article was written Zhang Ye and was originally published in the Global Times.