China’s gaming industry shrinks for the first time in years • TechCrunch

Over the past decade, China’s gaming industry has seen explosive growth, surpassing the US in market size and giving rise to global publishing giants like Tencent and NetEase. The boom is in part driven by a population that was rapidly getting online and gaining purchasing power. But the boom has come to an end as the market nears saturation and consumers tighten their wallets during economic headwinds.

China’s video game industry has seen a decline in sales for the first time since at least 2008, according to earlier reports from the country’s top games industry association. The market brought in 265.9 billion yuan ($39 billion) from video game sales in 2022, down 10.33% year-on-year, according to a new report released by the association on Tuesday. The overall user size shrank to 664 million, 0.33% less than the previous year.

Game sales in China from 2008 to 2018, published by the country’s leading game industry association. Link to report.

Game sales in China from 20014 to 2022, published by the country’s leading game industry association. Link to report.

The declines added pressure on an already struggling sector. In recent years, China has launched a series of crackdowns on video games, cracking down on content that is ideologically objectionable and limiting gaming time among underage users. Amidst the industry shakeout, regulators stopped issuing new gambling licenses for months; the process has resumed, but it now takes longer and costs more for companies to comply.

To create new opportunities for growth, developers from scrappy studios to behemoths like Tencent are heading abroad. Chinese games have been exported for years, but in recent times they have started to make a difference in the West. At the end of 2020, titles made in China accounted for up to 20% of mobile game revenues in the United States, according to market research firm Sensor Tower. Last July, 39 of the top 100 mobile games by worldwide revenue were from Chinese companies.

The proportion may even be higher in reality, as Chinese game developers, like other types of internet services, are increasingly trying to obscure their origins to avoid the backlash of being labeled “Chinese”. India, for example, has banned hundreds of Chinese apps in recent years, including the global hit PUBG Mobile, as its relations with China soured.

Chinese-made games had another promising year in 2022, racking up $17.3 billion in overseas sales, according to the industry report. Although the number was down 3.7% YoY, the decline was much less substantial than that of domestic sales.

China has a reputation for making lucrative and addictive mobile games, but its gaming giants are now ambitious to develop high-budget global hits that will stand the test of time. Tencent, the world’s largest gaming company by revenue, has a AAA console game in the works at its Lightspeed outpost in Los Angeles (Lightspeed is most famous for creating the mobile version of PUBG). Tencent nemesis NetEase is also busy setting up shop overseas. Having announced its first US office in Austen last May, the company recently teased another new studio.

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