How the actions of the Chinese authorities can affect the gaming market and close loopholes for developers

A little background

Over the past couple of months, China has tightened a number of rules and laws regarding video games.

We are talking about limiting the playing time of teenagers, banning IPOs in the United States and slowing down the licensing process. Also, more than 200 companies like Tencent and NetEase have signed an agreement on independent regulation of the industry.

These events have raised concerns about possible negative consequences for the industry. For example, some experts have talked about the reduction of the “gray” market and the threat to online stores like Steam and Epic Games Store. In addition, a website has appeared in China through which you can inform on companies that do not comply with age restrictions.

Ahmad’s opinionTo better understand the context of recent events, senior analyst Niko Partners briefly recalled the history of regulation of the gaming industry in China.

The main reforms took place in 2018 and 2019. During this time, a new complicated process of obtaining gaming licenses appeared in the country and the first norms were formed to combat gambling addiction among teenagers. Also in 2018, the government froze the issuance of licenses for nine months.

Thus, the recent actions of the authorities cannot be called unexpected. It’s just that now China has decided to force companies to strictly comply with the measures taken and do everything so that they act within the framework of the current legislation.

Active actions began last year. Then the local authorities forced Apple to remove from the App Store almost 50 thousand games that did not receive appropriate approval from the state. Regulators also took away licenses from all titles with illegal content and fined developers who released projects without a license.

Ahmad noted that now the relevant authorities have increased pressure on gaming companies. Before that, they could violate some requirements without much loss, but now developers will have to take on more responsibility and strictly comply with the laws.

According to Ahmad, the restriction of playing time alone can negatively affect not only teenagers, but also the entire Chinese industry as a whole:

• the minimum age of esports players can be raised from 16 to 18 years;the identity verification system using the real name will be extended to all platforms, including consoles;
• platforms for renting gaming accounts have already started blocking access to underage users;
• in most games, a facial recognition system will appear as a mandatory verification;
• the number of underage gamers (now there are about 110 million) will begin to decline, which will lead to a loss of potential audience.
• At the same time, one of the most serious threats is connected with the market of unlicensed games.

Now Chinese gamers can still buy games in the international version of Steam, bypassing restrictions, or watch streams on them at the appropriate sites. In case of possible blocking of foreign stores, users may lose such an opportunity, which will affect, among other things, an adult paying audience.

All this suggests that the Chinese authorities are trying to close any loopholes in the current legislation. However, the impact of such decisions on the gaming industry has yet to be assessed.