It’s no secret that Chinese gamers prefer Free-to-Play (F2P) online titles on their PC and mobile devices. The overwhelming majority of China’s gaming revenue is from online games and only a few titles such as Blizzard’s Overwatch, which is published by NetEase in China, can charge money upfront and be successful. That being said, we at Niko Partners have noticed a growing contingent of gamers who are willing to spend on paid games as well. Services such as Steam and Tencent’s Game Platform (TGP) have been gaining traction in the country and recently Valve noted that Asia is the fastest growing region for Steam with gaming revenues up 500% in the last 2 years. We’ve seen indies, both in China and the West, benefit from Steam and TGP with the traditional paid game model and even larger publishers are finding success on these platforms in China.

Niko Partners has tracked the Chinese games market since 2002, and for several of those early years our Chinese market intelligence included what we called “PC packaged games”. There were very few units sold in boxes at stores for full price, because there were very few offered – and that is because piracy rates are so high for physical disks. However, we track the demand in the market and gamers told us that they loved to play standalone games. In fact, from about 2002-2005 gamers reported that roughly 50% of their gaming time was spent on standalone games, but they downloaded them for free or bought cheap copies in a pirate store because they were not available otherwise. Hence, there is precedent for Chinese gamers to play standalone titles, even while the world watches their consumption of nearly $17 billion in PC online games in a year. This is where Steam and Tencent come in.

Steam’s Beginnings in China

Steam was unknown in China until Dota 2 came along a few years back. Valve and Perfect World opened a Chinese server for Dota 2 in the second half of 2013. All Dota 2 accounts needed to be connected with a Steam account to work. Many players saw this as a hassle and complained that the Steam account was like a zombie account since Dota 2 was the only game they owned. But this was how Steam started to acquire Chinese users. Perfect World has done a great job growing Dota 2 in China and the game is still very popular there. In fact, it’s the third largest region in the world for Dota 2 players according to SteamSpy. Perfect World will also be localizing Counter Strike: Global Offensive soon as well which is already a popular title among Chinese gamers on Steam.

Steam is unique in China in that it doesn’t follow the same rules that other game stores must follow. This means that publishing a game on Steam works the same way in China as it does in the West, and there is currently no regulation on the Chinese Steam store from the government. This has led to certain games like Grand Theft Auto V being distributed via Steam in China with no issues when really it would be banned on any other Chinese games service. There is no real reason for why Steam is still allowed in China but many speculate it could be due to Perfect World backing Dota 2, which requires a Steam account. Microsoft doesn’t have the same privilege and were forced to remove Gears of War 4 from the Chinese Windows 10 store for being too violent. Yet Grand Theft Auto V is still on the Steam China store.  

It is worth keeping in mind that the Chinese government could very easily impose restrictions and regulations on Steam in China at any time. This could make it harder for games to be published on the platform and many games could be banned from being sold in China if they are deemed as being immoral. Right now, these restrictions are not in place and so Steam remains an opportunity for many indie and larger publishers to target the niche of gamers in China who are willing to pay upfront for games.

The fact that Steam had banned games peaked the curiosity of a few Chinese gamers who wanted to try out this platform and this led to many of them purchasing their second game on Steam, Grand Theft Auto V. Grand Theft Auto V (GTA V) already had a huge presence globally and was marketed as the game to experience the American way of life. GTA V had a localized Chinese version and was considerably cheaper than the Western version of the game. The popularity of the game in China led to many live streamers playing the game on their channel and this in turn led to many more creating Steam accounts to buy and play the game.

According to SteamSpy, China is the second largest region for Grand Theft Auto V in terms of owners, which is a huge achievement when you consider just how big the game is worldwide. The game, along with Dota 2, also led to the increase of users in China but there were still a number of barriers to further growth. The first is that games didn’t really support Simplified Chinese or even make their presence known in the region. The second was that a credit card was needed to pay, which is a significant barrier, and the third was that the games cost money (unlike the typical F2P titles, which are downloaded for free).

Steam Starts to Take China Seriously

All three barriers were removed in November 2015 when Valve’s Gabe Newell decided to take the China market more seriously. Steam started to support the Chinese yuan, which became a boost for the service. In addition, AliPay (the “PayPal of China”) and Union Pay now allowed for direct payments on Steam and last month we saw WeChat Pay and TenPay were introduced as official payment methods. Valve also introduced parity pricing for the service, meaning games were almost 50% cheaper than US pricing (this is a critical pricing topic that Niko additionally addresses directly in our recent 2016 Southeast Asian Games Market Report & Forecast).

Games were also clearly marked if they offer Simplified Chinese support and this allowed Steam to have an instant boost in users and revenue. In fact, there are now more than 10 million Steam users in China, which makes it the second largest Steam region. It also allowed the average number of games owned to jump from 2-3 per user all the way up to 11 games owned per user in China. Removing these barriers had a hugely positive impact for game sales on Steam. A Chinese New Year sale went further towards growing the Steam user base.

Chinese gamers are willing to spend their hard-earned money on digital games as a relatively inexpensive and pervasive form of entertainment. Chinese players are showing more and more of their purchasing power on Steam. Many developers have started to pay more attention to localization in order to attract Chinese players. For example, the latest entry in the Civilization franchise, Civilization 6, now has Chinese audio and Simplified Chinese text. We’ve already seen that around 1/3^rd of the reviews are from Chinese gamers and that many of the reviews left are positive due to the added Simplified Chinese language support.

Another game that has seen success in China recently is the action RPG beat’em up Lost Castle by Chinese indie developer Hunter Studio. The game, which is published by Another Indie has seen huge success in China with around 70% of the 200,000 paid unit sales from China alone. Lost Castle became a hit with streamers across China and many purchased the game based on this and to support the indie game scene. Lost Castle was also able to stand out from the crowd due to its unique graphics and gameplay. Mainstream media in China also gave the game a boost when they noted how successful it was becoming. In addition, the team at Another Indie built up a strong community among China’s Steam gamers and encouraged purchases through well timed sales. The National Holiday sale led to another 20,000 copies being sold over the week.

Paid indie games are really coming into their own on Steam in China with titles like Dead by Daylight, Don’t Starve, BattleBlock Theater and Ark: Survival Evolved doing well recently. That being said, Grand Theft Auto V has led to more AAA titles like Left 4 Dead 2, Borderlands 2 and even Rise of the Tomb Raider, which has both Chinese voice and text, doing well. All of the games mentioned also have some sort of Chinese language support. There is no doubt that having some sort of competent Chinese language support will lead to adoption of the game in China. However, if the game is very simple to play then language support doesn’t matter too much.

Tencent’s TGP and its Integrations with Steam

Tencent is the largest games company in the world and are the owners of Riot Games and Supercell, with large investments in other games companies as well. Tencent Games Platform (TGP) is a PC-based client that gives users access to all Tencent games and extra benefits with more than 180 million registered users. It’s very similar to something like Ubisoft’s uPlay or EA’s Origin. Tencent wants to augment its service offering to include competing in China directly against Steam, and so are committing to bring third-party titles to their store from developers and publishers around the world. Tencent handle the localization, publishing and promotion.  A recent game that they bought over to Chinese gamers was Don’t Starve. The game has been localized for the Chinese market both in language and in the game’s content (like special costumes) and has a cheaper pricing model than the Steam version. This has led to over 1 million copies being sold on TGP in just a few weeks. The game is priced at 24 yuan on TGP, similar to the Steam price.

There is certainly an opportunity for developers and publishers to bring standalone games to China and the examples above should prove that. Tencent has noted this opportunity too and they’ve committed to developing their TGP to support more than 100 standalone games by the end of 2017. Tencent has become the largest games publisher in China by leveraging its WeChat and QQ services which are now used by over 800 million and 900 million people respectively. This gives them huge channel reach and ultimately gives them a massive advantage over Steam in China, which is tiny in comparison.

Whilst both platforms have their respective advantages and disadvantages, they cannot be ignored if you are a developer or publisher of standalone paid games. Steam is continuing to grow in China and TGP is a new opportunity with an already wide reach. These are just two of the many interesting ways for a foreign game company to enter the Chinese market, and we would be very happy to discuss them with you if you email [email protected].