The Chinese market for game developers Part 1.

Original Post can be found on Digital Disaster.

Finding data for the Chinese video game market can be difficult to come by. Information is often ambiguous, contradictory, or just plain wrong. If AAA studios with full marketing teams can struggle with the Chinese market, how do indie studios stand a chance of localizing their game for the largest video game market in 2021? Well, not anymore! I’m here to make sure you have all the information you need to succeed in breaking into China from my year of research on the Chinese video game market. 

Actual image of me writing my thesis. March 2020

Last Spring, I wrote my master’s thesis on how indie game devs were able to get into the Chinese market. I was expected to conduct my interviews with participants between the months of March and April. 

Turns out, trying to coordinate interviews with devs from around the world, who, themselves, are figuring out how to work from home because of a pandemic, is… a task. Who could have known?

Before I get into what became the catalyst of my crippling anxiety, I want to give a shoutout to those who were so generous with their time to share their experiences with me. Go follow these heroes!

Included in this information, aside from my thesis research, will also include some information I got from devs I have met with after my thesis, as well as some Chinese business practices I picked up from my education. The scope of the Information in this post will mostly apply to all platforms, so no worries if you’re on console, PC, or mobile, this post provides it all. However, to avoid making this post longer than it is, it will be in two parts, of which Part 2 will almost entirely be relevant to PC games. I really wanted to make this into one post, but it isn’t optimal for the amount of information contained in this topic, so please, forgive the multiple parts. Finally, I will address the political and economic underpinnings of the market in a completely separate post and give you the marketing red meat up front. Consider that post a future "Part 0".

If you have feedback or personal experiences with the Chinese market or how you localized your game, please get in contact with me! I want to keep the information updated, so please subscribe to our newsletter so you can keep as up-to-date as I am - I promise, no spam. If you are so inclined. Finally, if you so choose, you can find my full thesis on Digital Disaster.

In China, mobile is king emperor… but PC is still huge.

In the West, we are used to consoles being a significant portion of the market. However, according to Niko Partners, as of 2019, the Chinese game market is valued at roughly $33B, but consoles make up just under $1B of the market. PC dropped 4%, making up $14.6B and mobile gaming leading with $18.4B. By 2024, the entire market is expected to grow to over $46B. 

Data: Niko Partners, Image: Own

China is big. Obviously. But what makes China so difficult is the cultural distance and government barriers for the country. I wanted to go into detail about the Chinese language and the differences between Indo-European languages, but it’s easier to say that the languages are so different that an artificial written language had to be created to help romanize Chinese Hanzi. Reading and writing traditional script is, essentially, a separate knowledge. 

A Chinese syllable can be said 4 ways, each with a different meaning. Chance you calling your friend's mom a horse: 25%

What makes localization and translation so difficult is that everyday words we use for items, especially food, have no direct translations to Chinese, yet there are very few Chinese-English bilingual speakers exist. English, the world’s lingua franca, has 1.5B speakers, compared to 1.3B for Chinese speakers, of which only 10M (pay close attention to the letter there) speak English. Sure a ton of people speak either language, but share only a fraction of crossover to adequately convey cultural exchange en masse.

Now comes everyone’s favorite topic in the world: Politics. Chinese politics. Yes, I said I won’t go down this rabbit hole, but you do need to know what is acceptable, what is not, and the process of which you have to navigate to play nicely with the Chinese government. Which has always been perfectly rational, understanding of differing opinions, and infinitely patient. No further questions. 

Meet the SAPP

The State Administration of Press and Publication (SAPP) is the certification board that approves whether or not a game meets China’s regulations. The board has gone by many names and forms in the past, but as of 2018, it is THE governing body of what is considered “acceptable” by the government. So in order to be allowed to officially sell your game in China, SAPP must give you the OK, and as many who have gone through the process can tell you, it is a painfully lengthy process that all games on every platform, whether console, PC, and, as of  July 1, 2020, mobile, must go through. Sound complicated?

Expect delays in your approval, like, a year. Serious

Don't worry! For foreign devs, the process is incredibly easy. This is because your favorite Chinese publisher will be taking care of those headaches for you… because you have no other options. Wholly-owned Chinese publishers are the ONLY entities that can initiate and complete the certification process. But, before you get any wild ideas about using that one Chinese friend you have, the publisher must be a registered company and approved by the government. 

“So, I need to find a publisher. But, where?” Any trade show event (E3, Tokyo Game Show, etc) will have no shortage of Chinese publishers ready to do business. However, do NOT cut corners here. You cannot make this choice the same way you chose dinner last night. Sure, the 4th straight night of pizza is appealing, but this requires a LOT of research. Make this decision like you’re getting married, because you pretty much are.

There’s a lot of scam and poor quality publishers that are just looking to make a bit of money off of ambitious devs, but don’t let this scare you. There’s also a lot of high-quality publishers that do a lot of amazing work. I can tell you from my interview, Deck 13 had nothing but praise for their partner. But, as Dan Stern of Dangen mentioned, networking and business development is a full-time job in itself, but the benefits it offers, the knowledge of what is possible, it gives you better options. Finding the RIGHT partner is far better than finding the largest publisher. 

I highly encourage you to use existing connections with devs who already work with a publisher in China and see if they can make any recommendations. Information on partners in new markets is difficult to find, so rely on your current network. 

The best starting point I can offer. Most will handle console and PC games as well.

I understand not everyone may have a ton of connections though and it’s easy to try to seek out the big names like Tencent and NetEase. They have a huge reach and big connections, but will they promote your game as vigorously as the big titles in their portfolio? They may also say they aren’t the right partner for you. One dev told me, they were referred to other Chinese publishers because it would be a better fit for their game. There area  lot of great, smaller devs who specialize in your type of game. Don’t overlook the smaller publishers.

However, don’t expect a publisher may jump at the chance to publish your game. They know what works in their market, and they are the one taking on the risk of publishing the game (more on this below). As Stern points out, not every game should have a Chinese market strategy. 

Age Ratings

China's new age rating system - mercifully shortened to CADPA

As a dev, you are likely familiar with various age-rating boards and what countries ban specific content. I won’t sit and explain to you that many countries, not just China, have certain banned content. However, what you’re looking for is what you need to avoid in order to be acceptable in China.

Until a few weeks ago, China did not have an age rating system, which meant every game needed to be acceptable for all ages, which, is frustrating. In fact, you are not alone in that feeling. Chinese publishers and devs have been pushing for this for a while. So, as I write about what content is banned, understand that this system is new and some content is could be allowed in certain ratings, or they may not. Until we get more information, consider the following may continue to be banned content.

Avoiding the Banhammer

Most, if not all, of you will never acquire the rights to use Winnie the Pooh in your games, but let’s get the meme out of the way. Pooh is likely going to remain banned content until 2023, but probably much longer than that. 

Other content that will get you the big read “NOPE” stamp for your game: 

Green blood is what saved me from becoming a sociopathic killer. Thank you, Karen.

Not banned, but regulated:

OK, now that we know what content is officially banned in China, what performs well?

Understanding your audience

Certain types of games do better than others in China. Multiplayer aspects and shared experiences tend to be much more engaging to players. This is due to video games being, primarily, a social activity for Chinese players. One reason MOBAs and MMORPGs are so popular in China is that social aspect of games. 

/u/Gidorick on Reddit. Elder Scrolls is an example a perfect example of a self-contained fantasy world.

“But what about my RPG?” There is a place for those, too! However, here is where you need to take a step back from your own culture and ask yourself, “How much do I know about Chinese culture?” Assume that Chinese players may know as much about your culture as you know about yours. 

According to Stern, he found games that have wholly-contained worlds do best. You can likely borrow imagery from various cultures like Final Fantasy, which features Odin (Norse), Shiva Hindu), Bahamut (Judaic), and Ifrit (Islamic), but they don’t require pre-existing knowledge, nor do they play critical roles in the story. If you are a very culturally, lore-heavy game, you may want to sit this out.

Chinese translations can be... difficult

This is especially true if your game features pop culture, memes, or social commentary. When talking with Running with Scissors, there were portions of content they had to cut from the Chinese localization, not because it may or may not have caused offense, but because there was no way to adapt it in a way that would have made sense to the average Chinese player. Keeping the content in would have been detrimental to the overall project.

While we are on the topic, consider what may be considered offensive to your audience. In today’s wake of various studios receiving criticism for removing global content due to Chinese regulations, censorship of players, or delisting games because of outrage. Devs who are targeting the Chinese market need to make that decision early in development to reduce the amount of double work needed to make changes of altering offending content. For instance, the British developer I spoke with used the Japanese imperial flag in his game. When they were told that the flag is considered offensive in China, they changed the flag to the modern Japanese flag, they meant no offense by the use of the flag and changed the flag. 

This seems like a reasonable consideration to avoid unintentionally offending an audience, especially when it had no impact on the game itself. But I can understand that some devs have a very strong disposition against altering their work as an artist would a piece of art. Just understand, there are consequences for this as well.

But when you start working with a publisher, they will evaluate your game and help you identify these cultural missteps as well as tell you whether or not it is worth the time to localize and market it. If they say a game or certain content within it won’t work, trust their expertise.

Your new long-term commitment

Now that you have found some interested partners, it’s time to introduce you to the concept of guanxi (pronounced gwon-shÄ“). While this could end up being a blog post in itself, [writes that down] I will keep it short. In the west, we build relationships through our business dealings, in China, it’s the opposite. Think of guanxi like dating for business partners. Once you meet your Chinese partner, you may not talk about business for several meetings(you would never propose on the first date, right? RIGHT?). First, you must build a personal relationship, then a business one. Forewarning, get ready for questions we in the West consider taboo, like, “How much money do you make?” (This is considered a casual question in China). So take your time, enjoy some fun conversation, and probably tea. All the tea! Chinese companies, typically, don’t like one-time, transactional relationships, their goal is, typically, mutual, long-term growth.

Understanding Guanxi is vital to doing business in the Chinese market. Geddie et al, 2002

From my research and meetings with devs, Chinese publishers are often very helpful and provide many services (QA, translation, marketing, certification, etc.) “But at what cost” you may be asking. From my experience, no one has paid anything aside from the agreed upon revenue share of units sold in the market, and taking on all marketing risks. This revenue share is typically around 50%. For context, the movie industry sees 75% of its revenue go to Chinese publishers in the market. However, this may be negotiable based on various aspects. Deck 13 mentioned that they pay less of a revenue share because they were one of the first partners for their publisher, so they enjoy a “friends and family discount.” 

Business negotiation quick tips

Some of you may have been to China and are familiar with the aggressive bartering in the grey markets over knock-off goods. However, there is a significant difference between those negotiations and formal business negotiations in China. In the West, you take everything that you can leverage out of a deal. In China, ever take everything you can, leave your business partner something to take back to their company as a win, your future business relationship will thank you.  

Also, Chinese negotiators are extremely patient. If they don’t respond immediately or take their time, it is not because they disagree or don’t like the offer. They tend to carefully consider proposals. This has historically led to a lot of Western negotiators to get jumpy and try to sweeten the deal. This has often reinforced a purposeful waiting period to see if you will be the first to blink.

So that’s it? Find a good publisher and get certified? If I have no other choice...

...well, about that...

Steam, and more recently Epic, have been operating in China nearly unimpeded in the Chinese market. Save for some communication restrictions, all games are available in their non-SAPP approved release forms, regardless of their content. But are Chinese players using Steam? YES. Chinese gamers have downloaded almost 82.1PB (82,000TB) of games in the last week, compared to almost 83.6PB in the US. However, during sales, especially with Chinese New Year coming up, expect to see that number skyrocket soon. Chinese players buy a LOT of games on sale, and often indie games at full price.

Why doesn’t the Chinese government crackdown on Steam? The short, and anti-climatic, answer is... no one knows. But, if PC games have been enjoying full market access without any of the headaches, why would they seek certification? More market access, of course. If you can be everywhere, why not be everywhere? The other reason is risk aversion.

In June 2018, Steam partnered up with Perfect World, a Chinese publisher based in Huzhou, to create Steam China, an SAPP-approved version of Steam that will only list approved games. Needless to say, this has prompted some speculation that China may be preparing to shut down Valve’s free reign in the market. For now, Steam global remains a heavily used platform in the country. 

In Part 2, we will discuss what PC devs can do to work around the system. I really wanted to make this one post and not be click-baity about it, but this post is already getting long and condensing almost 100 pages of research into 1 blog post would not be doing the topic justice. So please, subscribe to our newsletter and you will receive all the good content with none of the bullshit. Promise.

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