China’s gaming industry, explained

With nearly 620 million players who spent over $37 billion on mobile and PC games in 2018, China currently boasts the world’s largest gaming market. To put that in perspective, the number of Chinese people who played video games last year was almost twice the size of the U.S. population.But its market dominance, which lasted for more than three years, is no longer undisputed. According to a report released in January by market analytics firm Newzoo, the U.S., for the first time since 2015, is poised to reclaim the number one spot at some point this year, while China’s gaming economy is forecast to shrink to $36.5 billion.

The prediction of a major decline, however, doesn’t come as a total surprise, given that 2018 was an exceptionally tough year for the domestic Chinese gaming industry, which hit rock bottom due to a confluence of hardships such as unexpected regulatory setbacks and persistent challenges.

How big is China’s gaming market?

While China is set to lose the crown of the world’s largest gaming market to the U.S. in 2019, the industry’s growth in the past ten years is nothing short of phenomenal. Between 2008 and 2018, China’s gaming market experienced a more-than-tenfold increase in revenue, rising from $2.7 billion to a whopping $37.9 billion, which accounted for about 28 percent of the global market and half the global mobile market that year.

For the computer side of the industry, it’s estimated that there will be 345 million PC gamers in China by the end of 2023, per a market report released by analyst firm Niko Partners this year.

Meanwhile, the mobile gaming market is on an upward trajectory and showed strong momentum in 2018 by generating $15.83 billion from 598 million mobile players, up from $12.13 billion in 2017. It’s reported that 95 percent of all those who play games in China play mobile games. Niko predicts that number of mobile players will rise to 728 million by 2023, and that the mobile gaming industry is expected to reach an annual revenue of $25.49 billion.

China is also home to tech and entertainment giant Tencent, which is the world’s largest gaming company. The mega-conglomerate’s gaming division earned $19.73 billion last year, making up nearly 15 percent of global gaming revenue in 2018.

Bans and regulations

For a long time, Chinese gamers were denied legal access to foreign video game consoles due to a decades-long ban implemented by the central government. In 2000, when the video arcade business just started to take off in the country, Chinese parents voiced concerns about their adverse effects on the youth, which prompted the government to draft a bill titled “Feedback regarding the launch of special operation on video game arcades.” In June 2000, the Chinese state council passed the bill, which included guidelines about opening hours and management rules of video arcades, as well as an outright ban on official sales of game consoles like PlayStation and Xbox in China.

In 2015, China finally lifted the ban, opening its door for foriegn industry giants such as Nintendo, Sony, and Microsoft to enter its market. But the whole industry still faces strict regulations as all video games must be approved by Chinese censors before their releases.

Among different segments in the gaming market, online games are subject to particular scrutiny. In March 2018, for reasons that remain unclear, Chinese authorities suddenly stopped approving the release of new titles. Around the same time, China created a new government agency called the Online Games Ethics Committee, which was designed to “review ethical issues in gaming.” When the hiatus was over towards the end of 2018, there were at least 5,000 games awaiting approval as a backlog. As of March this year, China has approved 726 video games in the aftermath of the ban.

The almost year-long licensing blackout was the main reason for the gaming industry’s slower growth last year. Tencent, in particular, felt the sting when its stocks and profits plummeted precipitously during the hiatus.

An enduring stigma around video games

If you asked Chinese adults who were new to the concept of online gaming 10 years ago about what a typical video game player looked like, they would very likely picture a high school dropout sitting in a crowded, dimly lit, and smoke-filled internet cafe, staring at a computer monitor with his bloodshot eyes wide open and fingers flying.

In the 1990s and the first half of the 2000s, when access to the internet was a luxury that most Chinese households couldn’t afford, internet cafes proliferated across the country and resulted in a generation of what the media called “internet-addicted teenagers” (wǎngyǐn shàonián 网瘾少年), who spent an unhealthy amount of time on video games and consequently detached themselves from the reality of schools and families.

While it’s hard to find shady internet cafes in China nowadays, exasperated parents still fret that excessive gaming leads teens to a purposeless life or could even make them violent and antisocial. To capitalize on this widespread fear, opportunistic psychiatrists and businesspeople have created hundreds of digital detox camps in the past decade. Usually without clinical qualifications, these facilities successfully convinced worried parents that gaming addiction is a real disease that can be cured through abusive methods such as electroshock therapy and other forms of physical punishment.

In some extreme cases, the violent techniques of these dodgy clinics led to fatal consequences. For instance, in 2017, an 18-year-old teenager died days after he was sent to an internet detox camp in Anhui Province. In the following years, high-profile incidents like this propelled the central government to draft a law to crack down on the use of abusive methods and forced closures of some internet detox facilities, including the Internet Addiction Treatment Center in Linyi, Shandong Province, which was once the most notorious internet detox camp in the country. But, as some people argued, it’s nearly impossible to eradicate such camps as long as the negative stigma around video games endures and keeps fueling the fear of Chinese parents.

Cheating and hacking problems

Cheating in games is a problem as old as gaming itself. And online gaming is no exception when it comes to casual and even elite players employing third-party programs to gain an unfair advantage in games. The situation is especially dire in China, where cheating is so prevalent that it has been accepted as a norm in the video-game community.

One particular game that’s plagued by Chinese hackers and cheaters is PlayerUnknown’s Battlegrounds (PUBG), an online multiplayer battle royale game that enjoys immense popularity in the country. In 2018, the anti-cheat software BattlEye revealed that about 99 percent of PUBG accounts that had been banned for cheating were from China. The severity of the issue even caught attention from Chinese authorities. Last year, in collaboration with Tencent, the game’s China distributor, Chinese police initiated a campaign targeting the hacking problem and made more than 15 arrests on charges that included “developing and selling hacking/cheating programs that affect PUBG.” But the crackdown seemed to have little lasting effect on China’s resilient and robust cheats markets because the demand for cheats is so huge.

Five must-know esports clubs and teams from China

Just like conventional sports such as football and tennis, which started as a casual activity and evolved into a multibillion dollar business, competitive video gaming, also known as esports, has a similar culture of professional leagues, serious gamers, international tournaments, and massive audiences. In China, the boom of its gaming industry has cultivated a host of clubs and star players who own a legion of die-hard fans and can sometimes rake in seven-figure earnings. Below are five Chinese organizations and teams that have left a distinctive mark on China’s esports history one way or another:

Invictus Gaming

Founded in 2011, Invictus Gaming (IG) is a multi-game organization mostly known for its team in the battle arena game League of Legends (LoL). Invictus made history last year for becoming the first mainland Chinese team to win a LoL Worlds title. Following its historic victory, the team currently sits at No. 12 in ESPN esports’s latest LoL global power ranking.

Since its inception, the team was a subject of special interest in the Chinese gaming community because of its founder, Wáng Sīcōng 王思聪, son of the Chinese business tycoon Wáng Jiànlín 王健林. Famous for his ultra-extravagant lifestyle and flamboyant online persona, Wang, an avid gamer himself, is also a huge investor in Chinese esports businesses and tends to raise the profile of the industry by leveraging his online fame. Last year, in celebration of IG’s championship on November 13, he gave away over 1 million yuan to 113 Weibo users.

OMG

OMG, short for Oh My God, is one of the pioneers that brought professional gamers into the public light. Created in 2012 and based in Shanghai, the organization’s players compete in League of Legends, Overwatch, and PUBG. In 2018, its PUBG team made its first entry into the PUBG Global Invitational in Berlin. While the team didn’t take home any prizes, the advance itself is momentous as it ended China’s 13-year title drought in first person shooting games.

Wings Gaming

Before it disbanded in 2017, Wings Gaming was a legendary team in many ways. Based in Chongqing, it literally started from the bottom ranks in the professional Dota 2 scene. After a string of initial failures, the team swiftly transformed its play style into a wildly unpredictable one and took all Dota 2 tournaments of its time by storm. In 2016, Wings Gaming took home over $9.1 million in prize money at The International 2016 (TI6), which marked the most lucrative esports tournament in history. The record-breaking prize also made Wings the first esports team to be nominated in the best non-Olympic athlete category of the 2016 Chinese Top 10 Laureus Sport Awards. In the same year, Wings Gaming were nominated as esports team of the year at The Game Awards.

Newbee

Newbee has another iconic China-based Dota 2 team, which rose to prominence before Wings Gaming. At The International 2014, it won $5 million, setting a Guinness World Records title for greatest prize money in a video game competition at the time.

Top esports

Founded in 2017, Top esports is a relatively new player in China’s esports scene. While the club’s primary focus is on League of Legends, its team in PUBG Mobile fought its way to a crushing triumph at the PUBG Mobile Club Open 2019 tournament, where it outplayed 15 teams and walked away with the biggest prize in mobile esports history, which amounts to $180,000.