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China's war on video games

Patrick Walker explains the freeze on Chinese video game licenses, and what they mean for the video game industry.

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Chinese leader Xi Jinping's shakeup of government had a wider governmental impact than had been previously anticipated, Bloomberg reported earlier this month. Although Chinese officials are not permitted to publicly discuss departmental affairs, it appears that the process of granting game licenses in China have been frozen 'temporarily' whilst the government undergoes a restructuring process. This is self-evidently a careless move, not just for Chinese developers and players, but for the global video game market itself.

Currently, it is the responsibility of the National Television and Radio Administration to oversee the licenses, which are delivered to developers once games undergo a censorship process. Anonymous officials within the administration commented that the reason for the freeze is a lack of leadership in the department. As China's leaders begin to further dominate its politics, lower-level bureaucrats are less willing to take risks that might impact their careers, especially considering the heightened criticism of the games industry in the Communist state.

It is fair to say, therefore that the government's refusal to grant licenses to developers is less an organised crackdown than it is an issue of practicality. That said, approval of those games in China is unlikely to be a priority for the government, considering its well-known disapproval of the industry. Measures came in earlier this year to curb games which encourage gambling (which is illegal in China,) as well as new regulations that limit the time children can spend playing. Even large developers struggle to force games through the approval process: both Fortnite and Player Unknown's Battlegrounds have yet to receive PC licenses, despite their backing from Chinese video game behemoth Tencent.

It's been four months since any new games have been approved for market, and Tencent is feeling the squeeze. Once worth over $500 billion, the game distributor's market value has fallen over $160 billion since the freeze began. The company currently owns WeChat, which is the one-size-fits-all social media and payment platform for China, but game publishing remains a large (and vital) sector of its business. It controls large stakes in Riot Games, Epic Games, Supercell, and Miniclip, all of which rely, to some extent, on Chinese gamers. China is the largest video game market in the world and accounts for 25% of global industry revenue. Tencent's global reach means that other developers will lose revenue as long as the Chinese market stagnates. Japanese developers Nexon and Capcom have lost 5.9% and 2.7% of their respective share prices too.

Tencent is the largest game publisher in the world: smaller developers in China do not have the cashflow to withstand the government's soft ban. A short-sighted curb in revenues today could yield a less productive Chinese tech industry tomorrow. It's also obvious that users are suffering too. China already experiences a large lag time in delivery when compared to the rest of the world because of its stringent censorship. If games are refused licensing altogether because of certain features, Chinese consumers are forced to use copycat titles: inferior copies of popular games with more draconian payment systems, worse graphics, and less quality control. Watching games on Twitch and YouTube, even searching for game information on Google: each step is harder because of the limitations on Chinese web traffic.

The problems currently faced by China are symptomatic of a wider global problem: gamers still face a constant stigma for their hobby, be it conservatives in America pinning the blame for school shootings on violent games, or Germany censoring blood in TF2 to the point where the entire cast of characters had to be made robots for German release. Governments refuse to look at the evidence regarding games and what they do to people: whilst the soft ban is in place, gamers around the world heave a collective groan for a government that refuses to listen to research that is, ironically, a quick Google away.


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