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Forget about the Chinese gaming market. Really.
Most of you reading this post do not need me to tell you that the Chinese game market is worth around $15 billion and year-over-year growth is at an astonishing rate of 100 percent (iresearch Q1, 2015). It is, without doubt, one of the most tempting and uncharted territory by Western game makers (with exceptions for the likes Blizzard and Valve). Take League of Legends: This multiplayer online battle arena (MOBA) has around 16M daily active users and brings in revenues equal to what it generates in the rest of the world combined.
Therefore, for anyone with a normal IQ and logical thinking — big market size and great growth rate is a market worth dying for.
Many have tried, but few have conquered. …
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I would leave out the console ban 15 years ago and focus on the last few years of online and mobile games. (I still don’t believe consoles will be big in China even with the ban being lifted; who’s gonna play a console that’s region-locked, plain vanilla, violence-free, and no Grand Theft Auto or Battlefield?)
The reality is actually pretty simple, if you look at the top 100 grossing chart of the Chinese iOS app store (App Annie). There are only around 10 non-Chinese games there. And this is the iOS app store – supposed no BS channel. Even games like Candy Crush Saga, Clash of Clan, and Game of War are not performing as they do in almost every other county in the world.
And then, you take a look at the 100-plus Android markets in China (Google Play is banned), and you would hardly find any foreign games there — correction: non-cracked, pirated ones.
Many would argue that this is due to lack of localization or culturalization. That may be true to some extent, but what Yodo1 and iDreamsky did to Subway Surfers, Temple Run, and Fruit Ninja were pretty successful. But ask yourself this: Shouldn’t the core game be universal? League of Legends, World of Warcraft, and World of Tanks do not compromise for anything when it comes to core game design, art-style, and UI/UX. Live operation maybe, but not the core. Localization should be considered the cherry on top instead of a game-changer.
One of the reasons is a third-party publishing partner is required as foreign companies are legally prohibited from publishing games in China.. Games on iOS get away from Chinese laws because Apple pays the tribute for you and is a major contributor to the Chinese economy, however, if you want your games to be published on the Chinese Android markets, you would need a Chinese local entity to help you with all the paperwork. Otherwise you would risk of getting pulled from store at any time.
Despite the high ARPU on iOS devices, Android markets are where the money is. Research shows that Chinese Android markets contribute to around 55 percent of the total revenue. And here is a fun fact: Chinese Android markets, at least the big ones (360, Baidu, Xiaomi, etc.), take 50 percent of gross revenue as a channel fee. Any Chinese third-party publisher must give 50 percent to channels, 30 percent minimal as revenue share to the developer, and 5 percent server cost, plus other marketing, operation, and other costs. You can do the math how much profit a third-party publisher really makes at the end of the day.
This is part of the reason why Tencent dropped the ball on Monster Strike and Candy Crush. Kunlun’s Boom Beach is just doing so-so, as well as many other games licensed by Chinese publishers. They would rather promote the games they developed themselves and make almost the same if not more profit.
What if I don’t play with channels and instead build my own portal site so players can just download the game directly? Well, good luck with buying shady traffic or getting no traffic at all. The Chinese Internet is a dangerous place, and those who control the traffic conquers all. Players don’t have the habit of downloading anything outside of market places, unless you promote the game with big-budget branding campaign like a PC downloadable client game.
Another fun fact is that when you compare the top-grossing Android games to iOS chart, you will notice that there is a big discrepancy in titles. Some of the games in the top “grossing” Android chart have never been seen on the iOS side. This is because many “game developers” don’t make money on their games; they put money into their own games via some third-party service or so-called game guilds in China. Thus boosting their performance and revenue metrics on the channels. Once they have 60 percent D2R, 10% pay rate, 100RMB ARPU (required by channels in order to get featured: no feature=no traffic), they would run to their investors and say “hey, my game is awesome, give me more money, buyout or IPO.” As for anyone who wants to do a decent business and meet the requirements of Channels, they will have a hard time unless the quality of the game is so good that everything else doesn’t matter anymore.
Situation and complication being said, there is really no one size fits all solution. China is a “go big or go home” scenario; it’s either that you have a kick-ass game, or you develop it from the ground up to meet Chinese needs. This is the only way to draw Chinese partner’s attention. Otherwise, just stay indie, stay true to gamers, and stay self-publishing on iOS.
Pessimistic I may be, but I do want to work with you and bring your next big hit to China so that players can enjoy.
Yuan Zeng is a struggling business developer trying replace chopsticks with forks and knives.
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