67 game titles were approved by China in July, while Tencent and Netease failed to make the cut again
On July 12, China’s gaming regulator authorized 67 titles, mostly mobile games, marking the third batch of games permitted this year.
After China’s 8-month halt on issuing game licenses which resumed this April, a total of 172 licenses have been approved this year, with 45 in April, 60 in June, and 67 in July.
All games launched in the country are required to be vetted by China’s National Press and Publication Administration (NPPA) before publishing.
The process is largely controlled by NPPA, which issued licenses once per month prior to the halt. Last year, as China embarked on an anti-addiction campaign to protect China’s youth from being intoxicated by inappropriate game content and spending long hours in-game, a halt on the issuance of game licenses was put in place in order to urge game companies makes adjustments accordingly.
After the issuance of game licenses was resumed in April, then stopped once again in May and resumed in June, the industry suspected game licenses will be issued on a bi-monthly schedule in the future. The speculation is now debunked after the new batch in July.
However, one thing remains certain — the game industry has a long way to go to overcome its current hardships. In the past years, approved game licenses have decreased gradually. 2064 titles were approved n 2018, 1570 were approved in 2019, 1405 were approved in 2020, and 755 were approved in 2021. Based on the current release schedule and quantity, provided that no significant change will happen in the second half of 2022, the total number of games approved is likely to be further lower to around 500.
In addition, the game industry has also been heavily impacted by the ongoing COVID pandemic in China. According to a report jointly released by Gamma Data and the China Game Industry Research Institute, the domestic game market showed a downward trend during 2022. Particularly, in March and April, the actual sales revenue of the game market was 22.572 billion yuan and 22.99 billion yuan respectively, down 9.05% and 3.40% year-on-year.
The absence of industry titans also contributed to the depression of the industry. Tencent and Netease, two of the biggest game developers and publishers in China, have missed out on getting license approvals for the third time in a row. Even though the two companies have other prominent businesses, gaming is an important source of revenue for both – in 2021, NetEase’s gaming revenue took up 71.7% of its total revenue, which further increased to 73.3% in the first quarter of 2022. Tencent’s gaming revenue was 31.1% and 32.2% of its total revenue in the first quarter of 2021 and 2022, respectively.
In June, Netease announced the delay of the “Diablo Immortal” debut in China. “Diablo Immortal” is a video game co-developed by Chinese gaming company NetEase and Blizzard Entertainment, approved by Chinese regulators in February 2021. Although Netease attributed the delay to technical updates, many suspects that the game’s license has been retracted. The claim lacks merit, but the delay itself was enough to send Netease’s stock in Hong Kong down over 10%.
Previously, Ding Lei, the founder and CEO of Netease has addressed the company’s plans to expand overseas. “There has been no issuance of game licenses in China for a long time. The overseas market development is a very firm strategic policy for NetEase”, Ding said during Netease’s 2021 Q4 earnings conference call, and hoped that “in two or three years, we hope to achieve great success overseas.”
As industry leaders such as Netease voices its ambition to potentially shift its business focus to overseas market, the future of the domestic game market remains dim.