Thirteen years ago, China banned video game console sales in the country. Now, it seems like the ban is coming to end, and while that is good, the reality of it all is that the lifting of the ban means literally phooey to China, the world and video games.
Now before I begin my tirade, I'd like to say this: I know the ban lift will have some significance. It will create a legal channel for the video game console industry (and in that sense, a larger part of the gaming industry as a whole) to enter China. Take the motion picture industry, for example: in the past, China was a long-forgotten bastard child of a market. It was filled with piracy and bootlegging; but now it's the golden goose of the movie industry. Of course my opinion here is that this boost to the gaming industry is only on the short term, and that in the long run, it doesn't even matter.
First off, lets start with some facts and history. In the year 2000 video game consoles were banned for sale in the Chinese mainland (that's excluding Hong Kong and Taiwan). This ban was a blanket ban that affected arcade halls and internet cafes on top of video game consoles. The reason for the ban was never clearly specified but what many agree upon is that China was looking to "protect its youth" from dangerous video games.
The ban was actually a series of regulations and restrictions set up by seven Chinese government entities which included the Ministry of Culture. Eventually, the restrictions and regulations on internet cafes and arcade halls eased up and allowed them to develop but the gaming ban was never lifted.
While the ban was on, video game consoles were available in China through the gray market, and also through different means: Sony's PS2 was briefly in China in the 2000's, being marketed as a computer entertainment device. Nintendo has been in China since 2003 with their partnership with iQue. Not to mention China's own domestic attempt at a home console by the now defunct eedoo.
Now, it appears that after 13 long years the Chinese government is going to lift the video game ban. News of this lift was first reported by the Hong Kong South China Morning Post and then followed up by the China Daily, the paper for which I work. The background behind this decision is that the government is promoting the new Shanghai Free Trade Zone and that in the documentation for this new free trade zone the gaming industry was going to be involved. Both articles cite unnamed government officials as sources; SCMP claims to have leaked documents regarding the free trade zone and the console ban lift.
The information provided so far states that game companies who wish to do business domestically (i.e. within China) must register in the Shanghai Free Trade Zone.
Now this is where things get interesting.
Throughout the years China has had multiple free trade zones. In the case of Shanghai, the Chinese government hopes to "deepen" and "reform" existing ties and markets, but in reality all it really sounds like is that the government is grasping for straws to get companies to return to China. The Chinese economy isn't failing but it isn't growing at the breakneck speed it did in the last decade.
But perhaps the biggest issue with the Shanghai Free Trade Zone are the unclear registration policies. Sure, you can say,"You have to register in a free trade zone to reap the benefits". But my answer is, what exactly does "register in Shanghai" even mean? At one point it meant that manufacturing and production needed to be done in Shanghai (this was removed from the SCMP post); if that's the case from a financial standpoint, it'd be impossible. Shanghai is one of the most expensive cities in China, and labour prices in China are growing. Companies such as Honhai (Foxconn) and Asustek (Asus/Pegatron) are now moving their factories inland. If they did keep it all in Shanghai the costs would be put upon the consumers.
The next issue is a broader one; it's about China and the Chinese government. The government put out the ban in 2000 to "protect its youth" from dangerous video games. Late last year during the once in a decade power change in the government, China revealed a plan to support and encourage the growth of domestic gaming companies. This all puts a damper on the possibility of opening up the domestic gaming market to the outside world. If there is money to be made, China would rather they made the money instead of other countries -- it's just common sense.
Moving past that, for a console itself to break into China, it has to be approved by the Certification and Accreditation Administration as well as other government agencies before it can go on sale in China. This process can take forever. By the time the PS3 or Xbox 360 gets certified, the PS4 and Xbox One will be available. Will Chinese gamers want to buy overpriced last generation hardware when the next gen is out so soon?
The next issue would be the games. Games fall under the jurisdiction of multiple ministries and offices like consoles do. A source revealed to me that Assassin's Creed 3 was delayed in China on PC last year because the game didn't make it past the General Administration of Press and Publication. Current censorship agreements are already in place -- just look at World of Warcraft in China.
But let's say the games do make it past the ministries and get published. How much of it will be censored? Media coming into China is subject to extreme scrutiny; just look at the movie industry. Will there be a set limit on how many foreign are allowed to come into China, like with films right now?
And what of the internet? The Great Firewall of China is still up and running and it's stronger than ever before. China's internet infrastructure isn't that great -- will there be online components to the games? Will China require special servers and special versions which will cost game developers, publishers, and consequently, consumers more money?
But let's say both consoles and their games were allowed into China. The opening up of the China market would theoretically equate to the gaming industry being reborn. That may not be the case. Right now, game consoles are the toys of those who can afford it (consoles are more affordable to the average American household than say the average Chinese) and, contrary to popular belief, China has one of the largest install bases of console gamers. Just look at the amount of news dedicated to consoles in China. My fellow China games writer Mr. Yang at netEase provided me with a great anecdote:
"Dynasty Warriors 6 sold over 600,000 units in Hong Kong alone. It's possible that there are 600,000 people who love Dynasty Warriors in Hong Kong, but it's more realistic that the bulk of it went to China via the grey market."
The grey market might also make things more complicated. Companies would have to spend loads of money to squash the grey market, and even then, it's unlikely to happen until Chinese laws and Chinese law enforcement catch up. Apple hasn't been able to squash the grey market so far -- scalpers literally stand outside Apple stores in China hawking grey market items. The iPhone 5 was first available in China outside of the Apple store, and it didn't see a domestic release till about 5 months later.
Ignoring the price and the availability, the next issue is with the popularity of the games. China right now is dominated by PC and mobile gaming. People play online games, many of which are free-to-play with in-app purchases. The current top five games in China are the following:
- 1) League of Legends (LOL),
- 2) Dungeon Fighter Online (DNF),
- 3) Crossfire Online (CF),
- 4) QQ Speed,
- 5) QQx5.
All of these games are free-to-play. The only two games on this list that could translate to consoles would be QQ Speed, and Crossfire Online.
Will the Chinese be ready for a one payment system? Who knows -- I personally doubt it. Sure, there will be lots of people shelling out money for a nifty new console to play games on, but in a land where piracy reigns supreme I can see more people buying an iPhone, jailbreaking it, and then downloading apps. The long time anecdote in China is that people will spend the money for the hardware but not for the applications.
Note that the official documents detailing the lifting of the ban haven't been released yet; in fact, they've been delayed. Until they're released and academics pour over them to interpret the regulations, all of this talk is kind of moot.
During my soon to be four consecutive years in China, there has been a lot of talk about lifting the ban. It happens literally every year during the annual party meeting dubbed the "Two Sessions". China, as it looks right now, doesn't need consoles because it already has them (albeit illegally). At the same time, even if the people want it, until the "Great Firewall" is dealt with and China's censorship policies are loosened, the country isn't ready for complete console gaming.