TECH NEWS – The overseas expansion of China’s biggest gaming companies is partly driven by frustration at home, according to a recent report.

A new report from Barron’s says the Chinese video game industry has seen its first decline in users and revenues in 14 years. The information comes after a year in which the government imposed severe restrictions on the country’s entire technology industry – restrictions that have only recently shown signs of easing.

Experts surveyed by Barron’s said the Chinese games industry – particularly the biggest companies such as Tencent and NetEase – is struggling to launch new games under Beijing’s licensing process, which was recently frozen for eight months. Last year, the country introduced new restrictions on the amount of time under 18s can play online games and tightened censorship of in-game content, making it difficult for the country’s games industry to operate domestically.

According to the South China Morning Post, 14,000 “small studios and game-related companies” will have closed down by December 2021 as a result of the restrictions.

Things are no better in 2022, with the government approving just 172 games for release this year, compared to 755 approved for release by the same time in 2021. Even more alarming for China’s best-known game companies, most of these approvals have been granted to relatively small game developers and publishers; NetEase and Tencent remain on ice.

Barron’s spoke with business professor Nir Kshetri, who explained that the government is unwilling to license licensed foreign games and “hardcore” (which I think loosely translates to “big budget” or “AAA”) games. So one of the reasons Tencent keeps buying up foreign game companies is that they “can’t get fed” at home.

The report paints a pretty chaotic picture of Chinese game development right now.

Although another expert interviewed by Barron’s – Daniel Ahmad of Niko Partners – predicted that the pressure on Tencent and NetEase will ease for future game licensing batches, it hardly seems surprising that these companies are focusing on overseas markets such as the US. Meanwhile, according to the report, Chinese games companies that do not have the resources of a giant multinational have simply given up and closed down in the past year.

Source: Barron’s, South China Morning Post