Round table: how the suspension of the certification of games in China will affect the developers


Causes and possible consequences.

Since March 28, 2018, China does not issue certificates for the publication of games due to the reorganization of the state body involved in this. As a result, there was not a single new game in the country – only those titles that were approved earlier. The government of the country has not yet commented on the refusal to issue licenses and does not indicate when certification will be resumed.

We turned to the staff of the publisher APPTUTTi and Nekki, as well as the studio Pixonic, to find out how the changed situation will affect the Russian developers who produce their products in China, and the industry as a whole.

What happened

In early August, analyst firm Newzoo published a forecast on the state of the Chinese video game market in 2018.According to experts, it will take first place in the world in terms ofand the total industry revenue in the country will be $ 37.9 billion, of which $ 23 billion will go to mobile games, another 14.4 billion to PC games, and 0.6 billion to console titles.

Wherein almost 619 million people of the country’s 1.4 billion population consider themselves gamers, and make in-game purchases – 94% of them.

Despite impressive forecasts, in March 2018, the Chinese video game market underwent major changes. The government of the country has abolished SAPPRFT – the state body responsible for the press, television, radio and cinema. He was replaced by the organization SART, which deals exclusively with radio and television. Cinema and media took over the propaganda department of the Communist Party of the country.

SAPPRFT was responsible for issuing licenses to all games published in China. Obviously, this work should now have been done by SART, butSince March 28, no game in this country has passed certification. This means that only those games that the SAPPRFT managed to endorse before they are eliminated come out in the PRC.

The reason for the suspension remains unknown. Moreover, until August 15, it was not officially spoken about at all – the first confirmation appeared only then in the Tencent quarterly report.

However, the issuance of certificates continued by another department – the Ministry of Culture of China, but its approval without a license issued by SART, is not enough. Because of this, any problems at Capcom, which published on WeGame platform by Tencent its Monster Hunter: World. The game came out in China on August 8, and after five days, Tencent was forced to remove Monster Hunter: World from the store and issue a refund to everyone who bought it.

As the Chinese company reported, the action disappeared from WeGame due to “numerous appeals” from the side of state authorities. They pointed out that Monster Hunter does not meet the standards for publishing games in the country.

How the suspension of certification will affect the industry

According to a study conducted by the firm and the Chinese game CNG Association of the GPC,in the first half of 2018, the video game market of China earned 15 billion dollars. This is 5% more than in the same period of 2017. Growth may seem stable, butfor the first time in nine years, it was less than 10% yoy.

According to analysts, the country’s industry is facing a recession for the year. Already, the growth of the mobile segment has slowed from 50% in 2017 to 13% in 2018. And this is despite the fact that almost half a billion people in the country play on mobile devices.

According to analyst of Orient Securities Gao Baowen (Gao Baowen), the effect of the suspension of certification does not appear immediately, because in China continue to go out of the game, licensed earlier.

Now thousands of games are awaiting approval. Judging by the fact that 700-800 titles are approved per month, existing applications will need two or three months to get certified. This means that during the summer holidays there will be a shortage of new products on the market, which will harm the growth of the industry.

SAPPRFT restructuring has already affected Tencent, the largest Chinese publisher. According to a report that she published in mid-August, her profit for the second quarter fell by 3% to 3.3 billion dollars. The decline was recorded for the first time in nine years. At the same time, Tencent does not know when the market situation is normalizing.

At the moment we do not know when certification will resume again. We are sure that the question here is not whether the previous monetization models will be available again in the games, but only when this happens.

Martin Lau did not accidentally mention monetization in this context, because Chinese regulators are tightening the rules regarding in-game purchases, Luthboxes and gambling after the Netherlands and Belgium.

Developer Opinions

At the moment, the ISBN issuance procedure is completely stopped for mobile gaming content developed in Continental China.

Foreign games go through certain stages of licensing.

1. Copyright registration.

2. A confirmation letter from the NRATA city office (National Radio and Television Administration).

3. A letter confirming receipt of the application from the central office of NRATA.

4. ISBN Resolution.

5. Official license

6. Permission for publication from the Ministry of Culture and Tourism and NRATA.

At the sixth stage, certification is suspended, but there is no official information and refusals.

According to Gutov, the suspension of licensing may be related to the “high level of commercialization of games,” but there is no evidence of this. However, he admits that the Chinese authorities can introduce tariffs for in-game purchases and regulate them. He does not see opportunities to ban existing monetization models.

In general, Gutov thinks that the situation may turn out to be beneficial for developers if the Chinese government tightens licensing rules in terms of requirements, but at the same time makes it less labor-intensive and faster.

Pixonic (War Robots) Business Development Director Alexey Shcherbakov believes that if the situation does not change, many Russian developers may lose access to the Chinese market.

The most obvious problem for developers from Russia is that they will lose access to one of the largest and fastest growing markets in the world. As practice shows, those developers who have released their projects in China have quite good profit indicators in this region.

According to him, the game authors will have to make a lot of edits to their products in order to comply with the regulations. At the same time, the suspension of certification will not have a noticeable effect on the local market, according to Shcherbakov.

The Chinese video game market is big enough, and local developers make good and large-scale products for the local audience. Well, the clones do no worse, so I do not think that the suspension of certification will have any noticeable impact on the local market, especially given its growth rate at the moment.

In turn, Nikita Korzhavin, director of business development at Nekki (Shadow Fight), notes that for his company, China is the main source of income, and revenue from this market is even ahead of the US. However, the main problem that currently faces Nekki is possible difficulties with games already released on iOS, and not certification of new ones for Android.

Our partners in China say that even if new requirements for publishing games in the Chinese App Store are introduced, they will only apply to new titles, not those already published. But the Chinese government is so unpredictable that one cannot be sure of anything.

We are still continuing the planned procedure for obtaining licenses for Android versions and will wait for the autumn congress of the Chinese Communist Party, at which, in theory, new decisions should be made in product licensing. In the worst case, if any certification of games is really suspended, our industry can suffer devastating losses.

Just like Gutov, Korzhavin does not believe that the Chinese authorities will impose a ban on existing monetization models, because it will hit local developers. However, he does not exclude that the rules governing in-game purchases and loot boxes will be tightened.

If there are new tightening, then I am sure that we will find a way out. And in general, it is not the monetization model that is important, but the content that can affect the mental and physical condition of so susceptible Chinese adolescents. I understand that current problems with licenses are related to the fact that already existing games in the Chinese market violate these rules.

Despite the fact that the Chinese authorities have not yet given any official comments on why certification was suspended and when it will be resumed, the effect of this decision is already noticeable. Until the situation clears up, developers are forced to be in a “suspended” state, awaiting further actions by regulators.

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