In my previous article, I shared some findings about the China mobile market in 2016 and a sneak peek of the trend in 2017. Now, I want to talk a little bit more about the current situation of the China mobile market, and what the trend means to mobile game developers in the west to get into it.
With massive amount of capital going into China in recent years, mobile game market has been growing rapidly, which leads to the anxiety about the bubble created in the mobile game industry. This anxiety is reasonable, but I personally don’t worry about that since the China game industry has a very solid foundation, and I have to say that the China game industry had been developing even more healthy nowadays. The consumer behavior of gamers in China has been changed with the new generation who, tend to pursue quality of the game and are aware of intellectual property rights, are becoming the major consumers (*). However, the environment for small mobile game developers or newcomers to survive is being more and more difficult in China now.
On one hand, numerous of small mobile developers emerged, causing the homogenization and overcapacity of mobile titles in the market. The monetization methods are highly similar affected the users’ willingness to spend in game, which lowered the ROI of the product.
On the other hand, the growth of new users slowed down, and the revenues flow towards several giant mobile distribution channels in the industry. Channels started to manipulate the China game market and took over the revenue from the developers. This trend reached its peak in 2013. “There are nearly 5,000 mobile games are under development right now, and 3,000 of them are expected to release beta version. However there are only 100 million mobile game player in China, so each of these 3,000 products will only get 30,000 users on average.” Said Haozhi Chen, CEO of Chukong Technology in 2013 (**). With mobile distribution channels controlled the game market, license fee shrank and even gone; also the revenue for developers decreased from 70% to around 50% on average, and the lowest can go as low as 20%. This situation was not eased until 2015.
Revenue Distribution of Developer & Publisher vs. Distribution Channels (Source: GPC 2016)
As mentioned previously, the game players and the market are developing towards a healthier, more matured stage, so the users nowadays are more likely to download games from official channels instead of third party channels. The third party channel seems becoming unnecessary when the users’ top priority of choosing a new game is to look for leading companies and their big titles, and then to access it directly from the official websites. Besides, the revenues are also centralized to big companies such as Tencent and Netease, which share almost 70%. Medium and small-sized companies are struggling; none of them reached market share of more than 5% individually.
Market Share of China Mobile Game Channels in 2016 (Source: GPC 2016)
Marketing cost, especially user acquisition cost skyrockets in recent years. In general, mobile games maintain their user base via continuous user acquisition activities. In average, the marketing cost including user acquisition operations goes as high as 60% of the entire marketing budget. So, the increasing marketing cost affected their bottom line drastically.
The above is not meant to scare people to get into that fierce market. I just want to illustrate that this market is really attractive but becomes more and more difficult to enter and survive. So, some people maybe discouraged, but some might think this is actually an opportunity. You just need to work harder, or even more desperate.
In order to succeed in China, a well planned strategy becomes more and more essential.
First, game genre. According to the 2016 China Game Industry Report (***), RPG is the one you should focus on. You might consider to combine it with other genre, and look at the numbers again, you might want to consider combine your RPG game with the card game mechanics.
User Monthly Spending of Different Mobile Game Genres (Source: GPC 2016)
Even better, if you can make your game with potential to thrill in the esport world as esport becomes one of the important revenue streams in China game market. The 2016 China Game Industry Report divided the market with esport type of games and non-esport one, and the esport game generated 7.33 billion USD in 2016, sharing 30.5% of the total.
Revenue Generated by Esports and Non-Esports Games (Source: GPC 2016)
While mentioned above that the influence of distribution Channels is diminishing, it is still strong. You can’t really ignore this fact if you want to be successful in China, at least not for the moment. The cooperation with big companies such as Tencent and Netease turns out even more critical now. Whenever possible, you should work with those giant publishers to take your game out to the China market. Of course there is give and take for this approach, I will most probably talk about that in the future. However, it is obviously difficult to approach those giant publishers; plus that if you are a small developer or a newcomer to the market, it would be very unlikely for them to talk to you, unless you have very successful stories from the other markets or a good connection with the key members.
So, the workaround is to partner with some publishers or developers in China who has a good relationship with those giant publishers. You might choose a codevelopment deal with them and then get it published by a giant publisher, or just work with them as a middleman to push it through to the giant publisher. Yes, I know it sounds desperate but still one of the best strategies for a small mobile game developer or a newcomer to be successful in this tough and rapidly growing market.
In order to get a hold of those related parties, networking is the key. Among all the networking platforms, attending game conferences in China is one of the best strategies.
At this point of time, I am recommending the Global Mobile Game Confederation (GMGC) which will be hosting its annual gaming conference in Beijing, on March 15-17, 2017. GMGC Beijing is one of the fastest growing and largest game event in China, hosted annually. This year it will feature over 200 speakers and will attract 15,000 industry professionals from over 35 countries. In the past 5 years, the GMGC Beijing hosted some of the biggest names in the game industry, including top minds from Baidu, EA, Tencent, Xiaomi, Gameloft, Google, to name just a few. So, you can expect to meet the influencers you need for your next big hit in the China market.
* Growing Population of Gamers Playing Non-Pirated Games in China
** http://dingpeng.baijia.baidu.com/article/769069 (in Chinese)
*** You can download the original report here.
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Seasun is a leading Chinese online games publisher focused on creating high quality games/game engines that push the boundaries of player experience in action entertainment. The company is also involved in small-medium sized investments for game studios worldwide. We have recently started up our U.S. studio in Redwood City, CA to create top quality content for the western market.
Seasun has shipped many successful titles, including the popular MMORPG series JX (http://jx3.xoyo.com/), the MMOARPG titles First Myth (http://fs.xoyo.com/index1) and CQ (http://cq.xoyo.com/), along with our FPS MAT (http://xd.xoyo.com/). The “JX” series has grossed more than $250 million and has achieved a daily active user count of 3.3 million. We are currently building a special team of highly talented people to create the technology for our next-generation MMOARPG at this studio.
Founded in 2015 and based in San Francisco’s East Bay, Magic Fuel Games is focusing on developing games that capture the imagination of players. With a core team of industry veterans, bringing decades of development and AAA experience from games that have captivated gamers around the world. The company's Series A was funded by Seasun Inc in February 2016 and has been growing its team and developing its 1st product since then.
Kingsoft, Seasun’s parent company, is publicly traded in the Hong Kong Stock Exchange (SEHK: 3888) with market value of 3.8 billion USD. Kingsoft has created 3 other subsidiaries alongside Seasun: Cheetah Mobile (NYSE: CMCM), WPS Office, and Kingsoft Cloud Service. Kingsoft has over 4,000 employees worldwide.