China gaming ban: no new licenses in May points to ‘new normal’ in regulatory hostility

·4-min read

China’s video game regulator has refrained from issuing any new licenses in May after it ended an eight-month freeze in April, signalling Beijing’s regulatory hostility will persist for now, industry insiders say.

The National Press and Publication Administration (NPPA), the agency in charge of licensing video games in China, approved a list of 45 new titles from game developers on April 11, raising hopes that the regulator would return to the old routine of approving dozens of titles on a monthly basis.

Since then, however, the agency stopped issuing new licenses to developers without any explanation, a departure from the previous episode of industry calamity. The agency approved hundreds of titles after December 2018, when it ended a nine-month ban after completing a regulatory regime reshuffle.

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China’s video game licensing freeze returns in May after reprieve

The stop-start pattern is a painful test for China’s gaming industry, which is already grappling with strict content censorship and stagnating growth in the number of players. The absence of new approvals last month is a clear sign that the good old days are over, analysts said.

“We do not expect the rate of approvals to differ from that of 2020 and 2021, nor do we expect a return to pre-2018 approval levels,” said Daniel Ahmad, a senior analyst at video game research firm Niko Partners.

The situation may become untenable for small and medium sized companies reliant on new licences to generate income. With no new games released, nearly 14,000 game-related firms in China were forced to shut down in 2021.

Many small game companies have been looking for investment or to be acquired to weather the storm, Ahmad said, with investors unsure of committing new capital. China’s mobile gaming market generates US$49 billion in revenue, making it the world’s biggest, according to US money manager Dodge & Cox.

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During the peak in 2017, over 9,000 games were approved to enter the market, but the number nosedived to 2,064 in 2018 after an eight-month hiatus. NPPA would release a list of approved titles monthly after the 2018 freeze, but the number of licences kept dropping in the following years. In 2021, only 679 games were approved.

In the new normal, however, the regulator may issue new licences every two months, or even quarterly, according to Chenyu Cui, a senior analyst at research firm Omedia. “It’s clear that the review process will only get stricter, ” she said.

As NPPA’s approval process is opaque and the regulator didn’t reply to repeated requests for comments, game developers can only wait for their luck and hope to see their applications approved before it’s too late.

For many gaming studios, it means some titles, which have already cost human and financial resources to develop, may never see the light of day.

“The only thing we can do is to sit here waiting,” a producer at a small game studio in Sichuan province who refused to reveal his name told the Post. The company submitted the application for a licence last July and still did not get the green light. “I’m not even sure if we can survive this month,” he said.

Without licences from the regulator, companies are not allowed to charge gamers fees or to generate revenues. Developers can only run beta tests or free trials for users to play.

With the world’s largest gaming market getting increasingly hostile, foreign companies are getting more hesitant when entering the Chinese market. Domestic game giants such as NetEase and Tencent are also shifting their focus, and actively seeking new opportunities in the overseas market.

Investors are extremely cautious to hand their money out as no one knows what will happen next, said Nana Wu, a Beijing-based freelance game illustrator. “The policy ambiguity is spooking everyone.”

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