How Does Mobile Game Become the Most Popular Form of Game in China? (Not PC games or console games)

“Do you guys not have any phones?”

When Diablo’s game designers announced on BlizzCon that their next Diablo game was a mobile game in 2018, the embarrassment spread around the world with the live broadcast.

This is understandable to Chinese players. NetEase, a Chinese game company, has enjoyed working with Blizzard in the past 10 years. NetEase has been running World of Warcraft’s Chinese mainland server for more than 10 years, and it has also brought the Warcraft series, Overwatch and StarCraft series to the Chinese market. At the same time, NetEase is also the second largest local game company in China (the first is Tencent). 

Therefore, if NetEase really told Activision Blizzard that mobile games were the future of the game industry, then the Blizzard would believe it. 

To some extent, this is true.

China’s video game market has exceeded 230.88 billion yuan (about US $35.1 billion). As you might think, this number is close to the United States. The total number of video game players in China has exceeded 640 million, which is three times the total population of the United States. As a result, China has become essentially the largest video game market.^[1]

And in this market, most people only play mobile games.

The market size of mobile games in China is 158.1 billion yuan.^[2] In other words, mobile games contribute 68% of the revenue of the entire Chinese video game market.

In the US and European markets, the situation is diametrically opposed. When people talk about video games, the first thing that comes to mind is those that run on game consoles and PC, not mobile. In the first understanding of many European and American players, mobile games are just as simple games as Windows Solitaire, but this is not the case for Chinese players.

Why are PC and console games not popular in China? In other words, why has mobile games become the mainstream in the game market in China? 

This article will try to explain this problem.

The lost 20 years of Video Games in China

From a global perspective, the peak of video game development is the 20-year period from 1990 to 2010. 

In the first 10 years of this, home game consoles and handheld game consoles stabilized their product form and game types, and a series of games which are still classic meet with players at this stage. 

In the last 10 years, the performance of personal computers increased significantly. The price decreased so that much more families could afford to buy one. Many PC buyers were not video game players at first, but when they were told that games were available on PC, they are willing to try, which significantly expanded the number of video game players worldwide.

Due to some historical factors, the Chinese market missed the rapid growth of the video game industry during that period.

Economic

First of all, the biggest premise is that the people’s Republic of China only began to fully allow the market economy in 1992. 

This means that in the first 10 years of the rapid development of video games (1990-2000), the Chinese would certainly not have much interest in video games. At that time, Chinese people were busy producing and consuming better clothes, shoes, hats, food and everything more important than video games.

However, video games were not completely inexistent during this period. In fact, in the 1990s, a cloned version of Family Console was very popular in China.

It is made by an electronics factory in Guangdong and was disguised as a computer with a full-size keyboard. But it was not cheap in China, and only children from wealthy urban families could afford it.

Of course, there were also some cities where children from very wealthy families could afford to buy original game consoles smuggled into China from Japan. But in the larger second-and third-tier cities, even in rural areas, people might never heard of video games because they had never seen game consoles or PC.

For reference, according to World Bank Database, China in 2000, there were only 16.31 personal computers per thousand people. The figure was 570.48 in the United States, 342.83 in the United Kingdom and 315.28 in Japan.

After entering the 2000s, the situation improved, with the improvement of people’s consumption level. Whether in first-tier cities, second-and third-tier cities or villages, a large number of Internet cafes and game halls appeared on the streets, and although most consumers were still not enough to buy their own computers or game consoles, they could access games through Internet cafes and game halls.

But soon, an accident ended the trend, with most Internet cafes closed and game halls banned. We would elaborate below. But in short, those who could not afford computers and game consoles had to say goodbye to video games again.

Pirated

Objectively speaking, although the situation has improved now, the problem of piracy in the Chinese market was very serious in the first decade of the 21st century. 

On the one hand, the spending power of Chinese urban residents was growing rapidly, and they were beginning to afford computers, VCD (DVD), Mp3 and handheld game consoles. On the other hand, their spending power was still not enough to support them to continue to buy content for these digital devices. Those were too expensive.

As a result, people bought these digital devices in order to better appreciate pirated content. Rather than infringing on the profits of the foreign video game industry, it played a more significant role in destroying China’s own game industry. 

In fact, China has had its own game companies since the 1990s, even though they were weak. In the history of PC games in China, there are two very famous series “Xuan-Yuan Sword” and “Chinese Paladin: Sword and Fairy”, which are called “two swords” by Chinese players. 

To put it simply, the two game series are similar to the classic JRPG, but use art styles and stories with Chinese characteristics. Both series originated in 1990 and peaked around 2001, then declined quickly.

It’s not because players are tired of these two games that make them decline. On the contrary, they are more popular than before.

PAL Inn, a simulated business game launched by the Chinese Paladin series in 2001, sold a total of 100,000 sets. But it is estimated that 3 million copies of pirated CDs were sold. ^[3]

As mentioned earlier, after entering the 21st century, due to the improvement of computer performance, video games ushered in a period of rapid development. It also means that the cost of making video games was rising rapidly. 

When Chinese game companies faced a market where games were obtained for free mainly through piracy, their production funds were becoming more and more tight, making it difficult for them to keep up with European and American game companies in terms of picture quality. 

On the other hand, Chinese players could also get high-quality games from Europe and the United States for free through piracy. This made them less likely to pay for low-quality Chinese games, so China’s game industry entered a vicious circle.

Culture

If you know a little about China, you will know that in the past 30 years, China has been in a culture of examination-oriented education. The essence of this culture is that anyone’s life before the age of 18 should be 100% devoted to learning. 

As a result, video game has become a very toxic thing.

As we mentioned above, in 1990s, there was a very popular Family Console Clone in China, which used a full-size computer keyboard as camouflage, to disguised itself as a “PC”.

In this way, its salespeople could tell parents that this was a machine to help child learn ,and they should buy one for them.

Despite he genuine Family Console was not allowed to be officially sold on Chinese mainland at the time, it could not be sold even if it was allowed. Because without camouflage, few Chinese parents would buy a game console for their children. They would not even allow their children to buy a game console with their own pocket money.

This culture has been trying to remove teenagers from China’s game market-despite the fact that there are still many young players in China. But it is widely considered immoral to promote and sell video games to teenagers.

In fact, among the contemptuous memes for three Chinese Internet giant, Alibaba (China’s version of Amazon) is “loan shark”, Baidu (China’s version of Google) is “Illegal doctor”, and Tencent (China’s version of Facebook) is “digital drug dealer.”

Tencent is considered a “digital drug dealer” not because its social network WeChat is addictive (in fact, few people have a problem with WeChat), but because it derives most of its revenue from video games. Video games are regarded as “digital heroin” in the eyes of many Chinese parents, seducing their children who should have been admitted to prestigious schools.

In the past decade, some extreme parents even sent their children to closed training schools similar to military academies, simply because their children have been playing games for a long time, which

has caused many tragedies.

Policy

In addition to all the above factors, another very important factor is the policy. 

The Chinese government banned the production and sale of all game equipment for almost a decade. This was not due to any political factors, but as we mentioned in the impact of cultural on the Chinese game market: mainstream Chinese families saw video games as a digital drug at that time. 

As we said in the brief history of Chinese Nijigen culture, there is a tragic opportunity for the birth of this policy: In June of 2002, dozens of minors were killed in a man-made crime in an Internet cafe in Beijing. 

This has brought Chinese parents’ hatred of video games to a new peak and deeply influenced all the directions of China’s video game policies since then. For nearly a decade, China banned the opening of new Internet cafes and game halls^[4], banned the production of game consoles, and allowed only a small number of games to be published. This situation would not be completely over until 2014.

China formally lifted its ban on the production and sale of game consoles in 2014.^[5] In the years that followed, Sony’s PS4, Microsoft’s Xbox series and Nintendo Switch were officially sold on Chinese mainland. But at this time, China’s game market has been occupied by mobile games, although these game consoles have gained part of the market, yet too late to become the mainstream.

In addition, China’s policy restrictions on the game industry have not completely disappeared. China has implemented a strategy of total control over China’s game industry since 2018^[6], which has significantly reduced the annual volume of local game publishing in China. The impact of this policy on China’s game market will be explained in the next section.

But I repeat here: this has almost nothing to do with censorship and is entirely designed to satisfy Chinese parents’ hatred of video games.

Why are mobile games popular?

Well, so far, we know how the Chinese market missed the 20 years of rapid development of video games from 1990 to 2010.

So, the next question is: Why did mobile games achieve so much success in the Chinese market after 2010? 

I will also list some key factors, but before that, we can actually explain it in simpler words: 

The success of mobile games in the Chinese market is, to some extent, like the success that China has taken the lead in mobile payment. Credit cards have never been popular in China for some reasons, so when people began to need convenient ways of payment after the popularity of smartphones, mobile payment became their inevitable choice. 

When Chinese people who have never played a video game before begin to pay attention to the video game, they find that they already have a high-performance handheld game console in their hand, a smartphoen. 

By 2020, most people’s smartphones will be more powerful than the Nintendo Switch. Moreover, it is more popular than Nintendo Switch. 

So the game designers of Diablo are right in a way. If players applaud the Nintendo Switch version of Diablo 3, how could they despise the mobile version? 

To some extent, this is the whole reason why mobile games can rise in China. But anyway, let’s talk about it in detail:

No upfront cost

As we said before in cultural factors, many people in China think that “video games” is a new typle of drug. Even among young people, this criticism is not so strong, yet some of them still think that playing games is not a good hobby. 

Therefore, how to get people who never play games to try games has become a problem. As a result, Chinese game companies have really learned the skill of giving something free to players like tobacco and drug companies. 

Before 2004, online games in China generally followed the model of charging according to the length of the game. But after 2005, almost all online games became Free 2 Play mode. 

“Upfront cost” refers not only to the cost of buying a game or the time card of it, but also to the cost of game equipment. In this case, it refers specifically to smartphones. 

Before the popularity of smartphones, many Chinese families did not have much incentive to buy personal computers. Although they may already use computers to work in the company, they have no need to use PC when they get home. 

But smartphones have changed many parts of Chinese daily life. You need it to browse social networks, you need it to read news, you need it to contact friends, you need it to pay, you need it to apply for loans, you need it to browse maps. In other words, people can have a happy lives without personal computer, but not owning a smartphone can cause big trouble. 

For reference, the number of mobile phone users in China reached 1.29 billion in May 2019. ^[7] But China’s PC penetration was about 20%-25% in 2018. ^[8] You’ll notice that PC coverage is more than 10 times higher than it was in 2000, but it’s still negligible compared to smartphones.

Therefore, “buying a mobile phone” is not the upfront cost of “playing mobile games”. But if you want to play PC games or games on consoles, you also have to pay for an extra piece of hardware. This further strengthens the advantages of mobile games over PC games and game consoles.

So, once again, “Do you guys not have any phones?”

Mobile games kill pirated to some extent

We have mentioned before that pirated games have destroyed China’s local game industry. When the Chinese market is full of pirated games, it will be difficult for local game companies to make a profit from their home country. 

But mobile games–or online games–have changed that. 

As a matter of fact, this is a parallel development. In the decade from 2000 to 2010, the development of single-player games in China was in a dilemma, but online games (which were not mobile games at that time) had begun to flourish. 

It was during this period that Tencent and NetEase, the two strongest game companies in China, began to join the game industry. In the early days of their development, they almost never made single-player games, because at that time people realized that if you released a game in China that did not require real-time online, it would only take 24 hours to crack. 

Due to the lack of local companies’ constant attention to standalone games, single-player games themselves have become niche, and its community has begun to wither.

On January 20, 2019, a vlogger posted his farewell video on bilibili.com (Chinese version of Youtube). He announced that he would go back to inherit his family’s multibillion-dollar business and stop being a game Vlogger, because he made a lot of videos, but didn’t get much viewing at all. This video has been viewed more than 6 million times, more popular than the total of his previous 80 game videos.^[9]

But in fact, the game vlogger is very popular on Bilibili. The only difference is that other games Vlogger create video with the theme of online games, while this Vlogger creates video with the theme of single-player games.

Due to long-term market education, Chinese players generally believe that games need to be played by multiple players online. Typical AAA games are even considered lonely and boring by many Chinese players. Regardless of the quality of the game itself.

Fragmented game time and space

This is in fact an additional “upfront cost”.

If you want to play PS5 or Xbox Series X, you need a big TV. If you buy a large TV, you need a living room.

But many of China’s new middle class do not have a living room.

The income level of Chinese people has improved in the past few years, especially those young people who have left their homes to work in the four super cities of Beijing, Shanghai, Guangzhou and Shenzhen.

These young people may earn 5 times as much a month in these supercities as they do in their hometown. This means that they can afford not only their PS5, but also the 72-inch LCD TV, and all the AAA games.

But they cannot afford to buy their own houses in these cities, because house prices may have risen 20-fold while their wages have risen 5-fold.

Many of these young people share a two-bedroom or three-bedroom apartment, each with a separate bedroom. The living room, as a public space, can be used by everyone in theory. It means that no one can really occupy that living room and put their televisions and game consoles there.

The group of college students is the same, because the dormitory space of college students in China is relatively narrow. Most students choose to buy laptops to complete their studies rather than desktop computers. In 2020, some laptops are not even as good as smartphones.

You don’t need a living room to play mobile games. The number of daily active users of PUBG Mobile in China is 50 million^[10] the number of, PUBG PC players in China may be only one of these. Players can start playing PUBG Mobile on the subway, on the sofa, in bed or even on the toilet. 

This is very important for young Chinese who are busy and living in rented housing.

Gacha

Gacha is another reason why mobile games dominate the Chinese market. 

Many foreign players don’t seem to understand why Chinese, Japanese and Korean games like Gacha so much. 

I don’t know what’s going on in Japan and South Korea, but in China, players don’t particularly like Gacha,. They just don’t have games without Gacha to play.

Only Gacha can make money for game makers, so they only launch Gacha games.

Here’s the thing: although the Chinese government lifted most of the bans on video games imposed at the beginning of the 21st century, not all of them. 

At present, China adopts a strategy of “total quantity control” to govern video games, specifically, the government strictly limits the number of new games released each year to a certain number. ^[6]

Imagine how you would respond to this policy if you were a game developer: You would try to maximize profits for each of your games and cut down risky, experimental works.

In the field of mobile games, what is the way to ensure 100% profit? It’s Gacha.

Your game can be a piece of shit, but as long as it contains sexy wifu and Gacha, someone will pay for it. That’s why Genshin Impact, which costs more than $100 million, is still a Gacha game under the cloak of the open world. Because only in this way can miHoYo ensure that it at least does not lose money.

There are some Chinese game companies that add some gameplay to Wifu and Gacha, which makes the game look good as a whole, such as Genshin Impact and Arknights. However, in China’s mobile game market, there are still a large number of games only Wifu and Gacha or just Gacha. When these games are released to overseas players, they significantly pollute foreign players’ impression of Chinese games.

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To some extent, mobile games must affect games consoles and game on PC. When the performance of the phone is strong enough, some (a large number) of players will eventually be reluctant to buy game consoles. 

It’s like mobile payments will eventually replace some credit cards and cash, which is a good thing, not as bad as most existing players think.

Lower upfront costs and more convenient gaming methods will turn many potential users who are not originally players into players. This will promote the development of the game industry and make the game community more lively.

But in the short term, this can be painful for classic players who are used to playing games on consoles and PC. They are likely to be shocked to find that sequels to their previous favorite games have become mobile games, such as Diablo Immortal and Octopath Traveler Mobile.

There is no doubt that the quality of the game will decline in the short term. Gacha will be added to more games, and because game developers are immature, it will be difficult for them to strike a balance between Gacha and gameplay.

For example, Chinese players foresee the nature of Genshin Impact as a Gacha game earlier than overseas players. This is not because they have played Genshin Impact earlier than overseas players, but because they have experienced a tsunami of Gacha games in the past five years, and they can see the hidden conspiracy behind every UI design and button in the Gacha game.

However, everything is getting better. In fact, five years ago, a high-cost mobile game like Genshin Impact would not have been possible even in the Chinese market.

Maybe in the next five years, players around the world will have mobile games of the same quality as PC games.

References:
[1] 2019年中国游戏产业报告：2019年中国游戏市场收入达2308.8亿元，用户规模6.4亿人 – GameRes游资网
[2] 2019年中国移动游戏市场发展现状 稳居全球第一市场份额行业研究报告 – 前瞻网
[3] 10年前的历史：中国单机游戏行业之死 – 知乎
[4] 网吧审批一“禁”能灵？-搜狐财经
[5] 游戏机销售禁令百度百科
[6] 教育部等八部门关于印发《综合防控儿童青少年近视实施方案》的通知 – 中华人民共和国教育部政府门户网站
[7] 中国手机上网用户12.9亿户 今年前4月使用流量349亿GB-新华网
[8] 社科院：中美PC渗透率相差70%，应加大智能PC投入科技腾讯网
[9] 那个“失败”的B站UP主，回家继承亿万家产了 – 知乎
[10] 光子赛高：《PUBGM》全球日活5000万，你是其中一份子吗？ – 云+社区 – 腾讯云