China’s gaming companies are cutting off projects and staff as the industry still lacks permission to release new games, Chinese media outlet Hongxing News reported on Tuesday.
Why it matters: China’s gaming industry has achieved steady growth despite increased regulation, with the actual sale revenue of self-developed games in the domestic market reaching RMB 255.8 billion ($40.4 billion) last year. However, the growth rate dropped sharply from 26.7% to 6.5% since 2020, according to a China Audio-video and Digital Publishing Association report.
- China’s National Press and Publication Administration (NPPA), the state’s regulator for news, prints and publications, stopped issuing new game licenses since July last year, without which new games cannot be released legally.
- Gaming companies have been forced to cut projects and lay off staff. About 14,000 small studios and gaming-related firms went out of business in 2021, South China Morning Post reported late last year.
Details: News about Shanghai gaming industry leaders laying off workers and cutting projects began to circulate on the Chinese internet in the past few days. Companies like Netease, Baidu, Lilith, IGG, and Perfect World have made cuts, Hongxing reported.
- Insiders from Lilith, one of China’s largest gaming companies by revenue, said that it has canceled the game Apocalypse Eden due to licensing problems. Members of the project team had been transferred internally.
- Another insider from Netease told Hongxing that the company had begun pausing developing projects as early as August last year and reassigned employees internally. Some staff have chosen to leave.
- An unnamed internal employee at IGG, a Chinese gaming company focused more on the foreign market, confirmed that it has cut staff in its Shanghai and Fuzhou offices, while continue to keep the lights on international gaming projects.
- Perfect World, the official operator of Dota 2 in mainland China, had already streamlined hundreds of employees in the fourth quarter of 2021.
Context: The last batch of games approved by the NPPA were granted licenses last July, seven months ago. The Chinese gaming industry was hit with a similar freeze in 2018, when new game approvals were stopped for nine months.
- Companies like Tencent and Netease were summoned to talk with regulators last year about “profit-making practices” as new regulations restricting playtime for minors were implemented.
- Last September, new rules restrict minors playing video games to just one hour on Fridays, Saturdays, and Sundays, as well as on holidays.