Is China’s Mobile Game market really lacking innovation?

Regardless of industry, China as a whole has largely been stereotyped as a country lacking in innovation and primarily focused on quantity rather than quality, going from 1 to 1,000,000+, but limited capability to make the jump from 0 to 1. Actually I believe its more like “0.5 to 1+1=3” (We will get more into this later)

Before we begin, just want to emphasize one point. 

Part 1: Why China lacks innovation

Part 2: Why China doesn’t really

Part 3: Final Thoughts

Part 1: Why China lacks innovation

Lack of training & retention - companies generally don’t spend as much effort into training up its own employees as foreign companies do and instead hire talented people with relevant experience. Because they are new to the company, these people have pressure to produce results as quickly as possible, which as a result are more likely to use an old model that has proven results rather than taking risks with more innovative gaming models.

Result Driven and Conservative Culture - Chinese culture is relatively result driven, from a test-taking oriented education systemto the ‘assumed’ lack of foundation in the country’s economic development, as a result many (not all) Chinese game companies prioritize a quick return over taking the risk to create something groundbreaking, as the end goal of companies is to turn a profit. In addition, Chinese tend to be quite conservative in general (Chinese people have one of the highest saving rate in the world (below chart), we save for our children’s wedding before they are born). Consequently many (not all) Chinese game companies prioritize a quick return over taking the risks with new gaming models, and resources are poured into new games using old models rather than developing completely new games. 

Management over technical, Business over games - Despite the gradual shift, a number of Chinese companies still place a higher importance on management over the technical staff, thus are more likely to be driven by financial statistics rather than striving to achieve the ‘perfect’ gaming experience. In addition, the Chinese mobile gaming market is largely dominated by a few game publishing companies/platforms, the largest of which is Tencent. Essentially all of these large publishers are publicly listed, making it impossible for them not to give a relatively higher priority to the financial aspects of a game.

Lax regulations - although this is prevalent in other countries as well, China has been well known for its ability to replicate products and games at an unimaginable pace, which deters people from trying to be innovative and taking risks. In the case that your game becomes successful, another company can create a decent replica within a month or 2, thus reducing your return, and in the case it doesn’t succeed (which is the case for most mobile games), you are faced with a lot of sunk costs.

Part 1 Summary: So yes, from a cultural and regulatory standpoint, China’s environment isn’t very conducive to producing a lot of innovative mobile games that can match the global performance as Clash of Clans or Pokemon GO has achieved, but this is slowly changing.

Part 2: Why it doesn’t really?

Many copies = successful model ≠ lack of innovation - Just because there are a lot of similar games on the market, it doesn’t really mean that its not innovative, it can only show that the pace of replication is faster than the innovation. Chinese mobile games are one of the most sophisticated and have very innovative ways of getting players to top-up in game. There are so many factors that drive all types of users to in-game spending that many non-spending users become spending users. Western games have often relied on once-off purchase, subscription or in-game advertising for its revenue generation, while the most successful games such as clash of clans or candy crush can afford to forgo these entirely. In China though, there are almost no paid games and have minimal or no in-game advertising. Revenue from top-up accounts for the majority of the games’ revenue generation, of which China is expected to (if not already) become the largest mobile game market in the world by revenue.

Difference in Standards - Going back to the highlighted point at the top of this article, when we approach the idea of ‘innovation’, we have to look beyond just a comparison with western standards. Gamers in different markets are accustomed to different types of games and gameplay, following on the above point of the result driven Chinese culture, this applies not only to Chinese game developers but also to Chinese Gamers. What may seem like monotonous and repetitive gameplay by western standards are all factors that contribute to increasing a whales’ in-game spending. For example, the annuity model is an innovative way to retain busy gamers that may not be able to login everyday. By purchasing an annuity package using a small amount of real currency, player’s can receive a small amount of in-game premium currency everyday, which will be accumulated even if they do not login for weeks, years and technically forever. This helps to greatly increase retention, as players with uncertain schedules can pause a game for days or weeks without falling so far behind that the competitive gameplay has become completely irrelevant to them.

Small game companies retain flexibility - Following up on the previous point of a more consolidated market with several large game publishers. In the face of escalating competition and the increased costs of creating an attractive mobile game, small- to medium-sized companies have to rely on their key asset — flexibility and ingenuity— and use it to breakthrough into the top of the charts. Thus innovation will always persist as long as there are indie developers and small companies that can acquire funding, of which China has a relatively decent start-up environment in general.

Part 3: Final Thoughts

Finally to the point that China game market is “0.5 to 1+1=3”? Actually this is going a bit off-topic to cover more than just the mobile game industry but also expanding into the general mobile app industry in China. Brief explanation of key terms

http://www.nytimes.com/video/technology/100000004574648/china-internet-wechat.html

Data from ‘the stories in online games social circle’ article, GMGC, Investopedia, HBR, NY Times and various other google search

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