Beijing, China – Before China started tackling video games, Zhang “Yvan” Yifan had no shortage of new titles to play.
Today, Zhang and his friends struggle to find games that pique their interest, after authorities halted licensing for nine months amid concerns about rising addiction in the world’s most populous nation.
So far, the Chinese market has released just 105 new games this year, compared to 755 titles in 2021 and more than 9,300 in 2017.
“Most of my friends like to play competitive first-person shooting games,” Zhang, a university student in Beijing, told Al Jazeera. “But we can’t find a game that we all want to play these days. The fact that I have fewer games to choose from is really sad for me.”
Zhang’s frustration is reflected in declining sales across the industry.
Video game revenues fell 1.8 percent to 147.8 billion yuan ($21.9 billion) in the first half of 2022 for the first time since data became available in 2008, according to industry figures published by the China Audio-Video and Digital Publishing Association and the China Audio-Video and Digital Publishing Association. Gaming Industry Research Institute of China. Excluding overseas sales, sales shrank 4.25 percent.
China’s slowing economy under “zero COVID” has exacerbated the woes in the sector, with many young people finding themselves having less money for non-essential purchases such as video games.
The world’s second-largest economy barely managed to avoid the contraction in the last quarter, growing just 0.4 percent, as authorities continued to implement strict lockdowns to contain the spread of COVID-19.
In June, youth unemployment reached 19.3 percent, the highest level ever.
For Jon, a 29-year-old Shanghai native who often plays mobile games like Honor or Kings, the tough economic situation meant he had to cut back on his hobby.
“I now spend less on games than I used to, even though I earn more now than in previous years,” Jon, who asked to be referred to by his English first name, told Al Jazeera.
“That’s because I’m afraid I’ll have to save more in these uncertain times, because I might get locked up or become unemployed.”
Games that can be downloaded for free have also not escaped the recession. Popular mobile titles such as Fate/Grand Order and Azur Lane rely on in-game purchases by players trying to get ahead of their peers to earn money.
“The economy and the job market are very bad,” Wang Liang, a 22-year-old university student in Beijing who loves first-person shooters, told Al Jazeera.
“So most gamers like me will inevitably have less disposable income to spend on games.”
The industry’s current difficulties follow an even more grueling 2021. Under sweeping industry regulation, Beijing introduced time limits on online gaming by minors and real-name verification rules to prevent anonymous in-game purchases.
While the end of April’s nine-month freeze on new titles offered a glimmer of hope for the industry, the number of releases was a trickle compared to previous years.
The two largest domestic players, Tencent Holdings and NetEase, which together account for about 60 percent of the market, and foreign publishers have not yet approved a single title for release.
“Although many dozens of titles have been approved, these resourceful players who understand the Chinese gaming market and players’ tastes very well have not been able to launch new titles,” said Nir Kshetri, a professor of economics at the University of North Carolina. in Greensboro. who has been researching the game industry in China, Al Jazeera told me.
Once thriving industry
The industry’s declining fortunes mark a sharp turnaround for the once thriving industry.
In 2017, China became the world’s gaming capital thanks to popular smartphone titles such as Honor of Kings and Fantasy Westward Journey, taking nearly a quarter of the $101.1 billion global market, according to research by venture capital firm Atomico.
Despite the regulatory and economic challenges, the Chinese gaming market brought in a total of 296.5 billion yuan ($46.6 billion) in sales revenue in 2021, up 6.4 percent from the previous year, according to the report. official government data.
According to research by Niko Partners, the Chinese esports sector was worth an estimated $403.1 million in the same year, making it the largest market in the world.
Some industry figures see this strong foundation as a reason to be optimistic about the future.
Speaking on condition of anonymity, the co-founder and COO of a gaming studio owned by Tencent said more regulation was needed and the easing of the license freeze was cause for hope.
“There are still many ways to drive the market,” the co-founder told Al Jazeera, pointing to in-app purchases and advertising, greater efficiencies in manufacturing, and emerging technologies like VR and the metaverse as possible solutions.
He downplayed the negative effect of the economy on the outlook for the sector.
“Lower disposable income means people will be more cautious about spending on games. But it doesn’t necessarily mean they’ll spend less on games,” he said.
“Gamers will become more and more demanding, so poor quality games won’t be able to make money as easily as they used to. Only high quality games can attract gamers to keep paying. That’s why game companies need to follow trends, focus on improving the quality of games, create more high-quality content, and explore more monetization opportunities.”
Others suggest the industry will need a significant period to recover.
More than 14,000 gaming-affiliated companies shut down during the first six months of the licensing freeze, according to a report in the South China Morning Post in January. Many other firms in adjacent sectors such as merchandising, advertising and publishing also suffered heavy losses during the period.
“Chinese developers are likely to face significant challenges to monetise their games until the ecosystem is rebuilt again,” Kshetri said.
In the meantime, frustrated gamers like Zhang can only wait in hope for a loosening up of the government’s grip on the sector.
He also hopes that the current turmoil will give the industry a necessary shake-up, ultimately leading to better quality games.
“The most important thing for multiplayer competitive games is the game environment, even more so than the game content, I think,” he said. “So if the game makers can give a better environment to the player, that will definitely make them happy again.”
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