Despite a lull in new game titles being approved, revenue in China’s gaming sector should recover by late 2019 and rebound by 2020, but gaming companies will continue to feel pressure on their profit margins, according to a report by market research firm Niko Partners
The lack of approvals comes after the State Administration of Radio and Television (SART) was formed in March to replace the State Administration of Radio, Film, and Television (SARFT), which in turn forms part of a broader push by the Chinese government to strengthen its control over cultural policies. The Ministry of Culture, which also oversaw approvals is also in the throes of restructuring.
However, the regulatory upheaval has yet to be completed and new game titles haven’t been published since March, resulting in diminishing revenue and slow growth in the industry. Niko Partners says the restructuring is due to be complete by the end of 2018, but agencies have until April 2019.
In October, Chinese regulators also limited game publication through a process known as the “green channel,” the only official way to get games on the market since the government froze new approvals. The system was introduced in August and allowed developers to run a one-month monetization trial for certain games
Chinese gaming revenue grew by 46% in 2017, but due to the regulatory shuffle, along with a crackdown on “cultural content,” just 11% year-on-year growth is predicted for 2018. Mobile gaming revenue is expected to reach $15.6 billion, 2.4% lower than projected in April. PC gaming has also been hit, with revenue anticipated to reach $15.2 billion, 3.8% lower than forecast.
In the biggest gaming market in the world, tech giant Tencent has become the biggest loser. The company has lost more than $200 billion in market value this year, in part due to the gaming crackdown. Tencent has announced its third large-scale restructuring in its 20-year history in order to focus on enterprise users, with a major push towards cloud computing.