The National Press and Publication Administration (NPPA) of China released its first batch of domestic game licenses for 2024 in the early hours of this morning, with its approval of 115 games sparking hope for a stable and positive regulatory environment in the industry this year.

Why it matters: Over the last two years, the average monthly issuance of domestic game licenses was around 80, with January 2023 only reaching 88. Today’s approvals represent the highest number of monthly licenses granted for two years. 

Details: The batch of 115 approved games includes 100 mobile games, eight dual-end (PC and mobile) games, four PC games, one PS game, and one web-page game.

• The main gaming titles are Need for Speed by Tencent Games, Etheria: Restart by X.D.Network, My Three Body: 2277 by YOOZOO Interactive, Call of Dragons by Lilith Games, Wait a Minute by 37 Interactive Entertainment, Anno: Mutationem by Leiting Games, and Youxing Continent by Bingchuan Network.
• The Three-Body Problem is an international award-winning science fiction novel written by Liu Cixin, widely acclaimed for its profound ideas, captivating storyline, and scientific precision. As the first officially licensed Three-Body Problem game, the turn-based strategy title My Three Body: 2277 has consistently garnered attention in China. In October 2023, details of the gameplay were unveiled, accompanied by the opening of online pre-registration, and the game is scheduled for a launch for both mobile and PC platforms in the first half of this year, according to Cailian Press.
• Launched globally in March 2023, Call of Dragons, developed by LEGOU Games and distributed by Lilith Games, is available for overseas markets on Android, iOS platforms, and PC. Call of Dragons is a multiplayer Western-style fantasy strategy game with 3D modeling, initially positioned for international audiences. Currently, the game has gained between 5 million and 10 million downloads on the Google Play Store in the global market, according to market intelligence firm SensorTower. However, it remains to be seen whether the game will find similar success with Chinese audiences.
• Additionally, the NPPA approved a number of previously-licensed games on new platforms for 2024. NetEase’s card collection role-playing game Harry Potter: Magic Awakening and Perfect World’s turn-based role-playing game Persona 5: The Phantom X have both added a PC version, while X.D.Network introduced the Nintendo Switch version for its puzzle adventure game Moncage.

Context: In 2023, the NPPA released 977 domestic game licenses, representing a year-on-year growth of 108.76%. 

• In December 2023, an industry report from The China Game Industry indicated that the revenue of the domestic gaming market reached RMB 3,029.64 billion ($426.83 billion) in 2023, a year-on-year growth of 13.95% and the first time that China’s gaming market has surpassed three trillion RMB. The user base also reached a historic high of 668 million.

Last week’s global launch of Papergames’ Love and Deepspace, a title touted as the first otome game to feature 3D modeling, has sparked a battle over the female-focused romance games market, with China’s major gaming companies weighing in with a raft of special offers and promotional events.

Otome games are typically targeted towards female players, with the Japanese term translating to maiden or young lady. The games often involve a female protagonist who interacts with male characters, and the gameplay focuses on developing romantic relationships with one or more of these characters.

Why it matters: Having previously found success with otome game Mr. Love: Queen’s Choice, Papergames’s new title aims to provide players with a more realistic interactive experience through its iterative improvements in 3D character modeling. The release has sparked intense competition in the sector.

Details: On January 18, the day Love and Deepspace launched, China’s major domestic gaming companies all unveiled new promotional activities within their respective otome games. Light and Night from Tencent Games, HoYoverse’s Tears of Themis, and For All Time by NetEase Games are among the genre’s most popular titles, alongside Papergames’ Mr. Love: Queen’s Choice.

• On the day of the Love and Deepspace’s release, a trending hashtag #0118决战国乙之巅# (Battle for the Peak of Chinese Otome Games on January 18) appeared on China’s Twitter-like platform Weibo. Posts under the hashtag listed the various promotional activities and benefits of domestic otome games, as Chinese players expressed their excitement over the developments.
• In order to compete for potential new players, NetEase’s new otome game Beyond the World, originally scheduled for a public beta release on January 26, announced on January 16 that it would bring its open testing period forward to January 18. NetEase also offered various in-game promotional events and benefits that were similar to those available in Love and Deepspace.
• Also coinciding with the Love and Deepspace’s launch, Tencent Games held its largest celebration event for the Light and Night since its launch in 2022, showering players with free benefits. Players can even receive animated video calls from game characters as part of the new offerings. Furthermore, Light and Night announced an ancient-style gacha event, a gameplay mechanic where players spend in-game currency to obtain random rare virtual characters. 
• Love and Deepspace had already received over 14 million pre-registrations before its official release, according to Papergames. At time of writing, the game is in the top ten iOS free-download games in the Chinese region. The game’s estimated revenue from iOS on the first day reached RMB 5.27 million ($740,000), while iOS downloads amounted to 890,000 during the same period, according to market intelligence firm DataEye.

Context: Otome games are popular in Asia due to culturally resonant narratives, attractive character designs, and targeted marketing towards female players. They align with animated gaming trends in the region, providing escapism through romantic fantasy scenarios.

• According to Qimai Data, Mr. Love: Queen’s Choice, generated a revenue of RMB 760 million ($108 million) in 2023.
• In September 2023, SensorTower released its State of Mobile Games Preferred by Women insights report (in Chinese), stating that the annual revenue for 2023 from female players was expected to exceed $16 billion.

On Jan. 13, Tencent announced that its hit game Honor of Kings would resume livestreaming on Douyin (China’s TikTok sibling) five years after it was banned following a copyright infringement case. In 2016, Tencent sued ByteDance for livestreaming the online game on its subsidiary video platform Xigua. In 2019, a court ruling in Guangzhou stated that ByteDance platforms were prohibited from livestreaming Honor of Kings without Tencent’s permission.

Why it matters: The return of Honor of Kings to Douyin signifies a further thawing of the relationship between Tencent and ByteDance. Tencent has been gradually lifting restrictions on ByteDance, as its competitor has begun scaling back its gaming interests in recent months.

Details: Tencent’s Honor of Kings is expected to start livestreaming on Douyin on Jan. 21, with game streamers invited to participate in the splashy return, as announced on the game’s page on China’s Twitter-like platform Weibo.

• Tencent Games plans to conduct testing of Honor of Kings on Douyin from Jan. 14 to Jan. 17, aimed at avoiding technical issues that may arise during the first live broadcast. From Jan. 18 to Jan. 20, Honor of Kings will host various game-themed activities on Douyin, with invited gaming influencers heading livestream sessions and handing out in-game benefits.
• A gaming industry insider said Tencent’s efforts to reconcile with Douyin stem from a noticeable slowdown in Tencent’s gaming revenue growth since 2022, according to Sina. New player growth and revenue for Honor of Kings have been weaker than in previous years, leading to immense pressure on Tencent’s gaming team, the insider said. 
• Another of Tencent’s hit games, PUBG Mobile, has also seen a decline in users, but there are currently no other new hit games to make up for the loss, the same insider added. In December 2023, Tencent released DreamStar, a new party game with the potential to challenge its domestic rival NetEase’s Eggy Party. At this stage it remains uncertain if it will emerge as the firm’s next hit game.
• Both parties may seek further collaboration in the future, as ByteDance has the potential to work with Tencent in areas including joint operations and distribution partnerships, according to the same Sina report. Douyin currently plays a crucial role in the gaming industry in China as a major channel for advertising and new player acquisition, and Tencent cannot afford to ignore it, the Sina report said.

Context: On Jan. 9, TikTok owner ByteDance said it was engaged in discussions with various potential buyers, including Tencent Games, for its gaming assets, according to Reuters. The two giants are discussing a deal involving major games published by ByteDance’s gaming unit Nuverse, as the TikTok owner looks to step back from the gaming industry.

• In November 2023, ByteDance unveiled plans to scale down its Nuverse gaming unit and sell related gaming assets in a strategic shift away from the gaming industry.
• Honor of Kings, a hit multiplayer online battle arena (MOBA) game, generated nearly $1.48 billion in 2023 for Tencent, but saw a notable decline compared to the $1.8 billion achieved in 2022, according to market intelligence AppMagic.

The US game developer Activision Blizzard, which has recently been in discussions with several domestic game companies regarding the revival of its Chinese service after a one-year absence, has decided to re-establish collaboration with Chinese game publisher NetEase, as reported exclusively by local media outlet 36Kr.

Why it matters: The split between NetEase and Blizzard was a major event in the gaming industry this year. On Jan. 24, 2023, the Chinese servers of Blizzard’s gaming platform were shut down, ending the World of Warcraft publisher’s 15-year partnership with NetEase in China. On Monday, most domestic gamers were shocked to hear about the potential revival of cooperation between the two gaming giants, especially after their previous relationship ultimately ended in acrimony.

Details: The relaunch of Blizzard’s games in China may have to wait for at least six months, as NetEase and Blizzard need to rebuild their domestic operations team and test the new servers after once any new deal is confirmed, according to 36Kr. 

• The return of Blizzard suggests a full restoration of gaming titles under its brand in mainland China, including World of Warcraft, Hearthstone, Warcraft III: Reforged, Overwatch, the StarCraft series, Diablo III, and Heroes of the Storm.
• News of Blizzard’s return instantly topped the trending topics chart on Twitter-like platform Weibo on Monday, with Chinese players expressing their shock at the quick reunion. NetEase declined to comment on the story, while Blizzard China stated that the company currently does not have any information or updates to share, according to Sina Tech.
• NetEase Dashen, a gaming community app, has begun to gradually update with new content on World of Warcraft since Dec. 20, as reported by Southern Metropolis Daily. Additionally, the app no longer displays previous news items regarding NetEase’s discontinuing of the operation of World of Warcraft.
• Blizzard has also been in contact with several other major Chinese gaming companies this year, including Tencent, ByteDance, and Bilibili, regarding the takeover of its domestic service, according to Cailianpress. Tencent denied the possibility of a deal, while ByteDance is currently preparing to sell its entire gaming sector, making a move highly unlikely. As for Bilibili, the performance of its games business is not very satisfactory at present, the report claimed.

Context: Blizzard announced in November 2022 that it would suspend its game services in China due to the expiration of its licensing agreements with NetEase. However, Microsoft’s acquisition of Blizzard this year and the upcoming resignation of Blizzard’s CEO have brought about a turning point in the relationship between Blizzard and NetEase.

• Bobby Kotick, the CEO of Blizzard, will resign from his position as the leader of the video game company On Dec. 29, as communicated in an internal memo from Phil Spencer, the CEO of Microsoft Gaming. The leadership transition was expected after Microsoft’s completion of the $69 billion acquisition of Blizzard in October, as reported by CNBC.

Note: The article was first published on TechNode China written by Penghui Li and translated by Zinan Zhang and Jake Newby.

After the era of going global, China’s overseas expansion through mobile applications is entering a new period of development.

Take the gaming sector as an example. According to data previously released by Adjust, in 2022, the total overseas revenue of Chinese games reached $17.3 billion, which is equivalent to 60% of the country’s domestic gaming revenue, and saw Chinese firms capture a 15% share of the global mobile gaming market, which is valued at $110 billion. Furthermore, Adjust also points out that there is still significant room for growth in the overseas revenue of Chinese games, with the projection that this figure will increase to $26.5 billion by 2026. Correspondingly, nearly 80% of Chinese app developers have plans to go global.

It is not difficult to observe that although the growth rate of the mobile application market has begun to fall back to the pre-epidemic level gradually and domestic competition is increasing, both enterprises and individual developers are increasingly considering the overseas market as a necessary option.

Recently, at the 2023 Google Developers Conference, TNGlobal had the honor of having a conversation with Purnima Mehta, the Global Vice President of Partnerships at Google Play, about the recent changes in the overseas expansion of Chinese developers and the prospects of this new wave of Chinese developers going global.

Mehta was last in China four years ago. Based on her experiences in engaging with Chinese developers during this period, she noted a significant change at the developer level. Previously, Chinese developers focused on the Chinese market and gradually expanded globally. However, Chinese developers are now starting with a global perspective. She notes that Chinese developers are more ambitious, with many aiming to reach a global audience, even small companies. 

Google Play announces awards at the end of each year, selected based on different local markets. Notably, 48 Chinese applications received Best of Play awards from 23 markets and regions at the end of 2022. According to Mehta,  “This shows that Chinese developers truly understand the demands of different local markets.”

Mehta also pointed out several factors behind Chinese developers achieving such broad success in overseas markets. Firstly, the size of the Chinese domestic market is immense, so Chinese developers are accustomed to working in a market on a very large scale. Secondly, China has long emphasized overseas markets. Therefore, developers naturally have a global mindset. Thirdly, there are abundant resources. She mentioned that China has a vast talent pool, capable of building large teams.

“I’ve seen a statistic that there are 110 million developers in China with significant development capabilities. So it’s hard to imagine the scale of developer teams and talent, as well as their testing capabilities,” Mehta told us. “The export-oriented mindset and the enormous market size lead Chinese developers to consider that their applications should be adaptable to various devices from the design stage. Unlike other markets, where the audience may be smaller and limited to specific types of devices, Chinese developers do not face such constraints. Additionally, China has a strong developer community that helps each other. Many people have undergone significant training, and this community fosters a great development atmosphere.”

With the mobile app global expansion track becoming increasingly competitive, the challenges in this field are also getting tougher. Regarding this, Mehta offered several suggestions. Firstly, in any industry, you must learn from the best in that industry. All Google and Android tools are open. So, you should not attempt shortcuts or rush to market your app; instead, focus on quality. The competition in this market is fierce, so you must learn from the best.

Secondly, you must understand what users need and what kind of value proposition you can provide. If your app is just like the others on the market, it’s hard to be successful. Therefore, while you need to learn from the best, you must also have your unique qualities.

“Thirdly, always remember to prioritize user trust and security. Once trust is lost, users are lost. Also, every time someone asks ‘what is it,’ I like to emphasize ‘how it’s done.’ I think you should consider yourself a user and use all these apps. So, start by being a user yourself, download as many apps as possible, and try them out. This is the easiest and simplest way to judge what is good and what is not. In China, there is a fantastic developer community. We have a very active group called the Google Developer Community, so Chinese developers should participate in these communities to exchange and learn. There is a lot of content available, and all the tools are free. So, you must try, test, and experience.”

The Asian Games 2023 will take place in Hangzhou, China, from September 23 to October 8. Esports (online gaming), included as an official event of the Asian Games for the first time, will offer seven gold medals across seven gaming titles. 

Why it matters: The 19th Asian Games have introduced Esports as a medal event, giving global recognition to this emerging form of sport alongside more familiar physical activities. In recent years, Esports has gained significant popularity worldwide, demanding a comparable level of  skill, strategy, and dedication to traditional sports.

Details: Over 15 days of competition, the Hangzhou Asian Games will award a total of 481 gold medals, including seven gold medals for Esports. 

• A total of 45 countries have registered for the Asian Games 2023, with 31 countries and regions participating in Esports, according to Tencent Games. Over 500 Esport athletes will compete for gold medals at the Hangzhou Esports Center. Completed in 2022, the Hangzhou Esports Center covers an area of 80,000 square meters, and can accommodate up to 5,000 spectators. It was designed specifically for the Asian Games Esports events and resembles a sci-fi spaceship when viewed from above.
• The Esports lineup comprises: League of Legends, DOTA 2, Honor of Kings (also known as Arena of Valor), PUBG, FIFA Online 4, Street Fighter V, and Dream Three Kingdoms 2. Of these, two gaming titles were developed by Chinese game developers. Honor of Kings was developed by Timi Studio Group (a subsidiary of Tencent Games), while Dream Three Kingdoms 2 was published by Hangzhou Electronic Soul Network Technology.
• League of Legends, DOTA 2, and Honor of Kings belong to the multiplayer online battle arena (MOBA) game genre. They involve two teams competing against each other to destroy an enemy base while defending their own base. MOBA games combine elements of strategy, teamwork, and individual skill, offering a wide range of heroes, each with unique abilities.
• PUBG, which stands for Player Unknown’s Battlegrounds, is an online multiplayer battle royale game. Players are dropped onto a remote island along with 99 other players, where they must scavenge for weapons, armor, and supplies while eliminating other players. The ultimate goal is to be the last player or team standing. The game features a shrinking play zone that forces players into closer and more intense encounters as play progresses.
• FIFA Online 4 is a free-to-play online football simulation game, belonging to the popular FIFA series. Players can create and manage their own virtual football teams, compete against other players in online matches, and participate in various game modes, including league play, tournaments, and more. The game includes a wide range of real-life football players, teams, and leagues from around the world.
• Street Fighter V features a roster of diverse characters, each with their own unique fighting styles and special moves. Players engage in one-on-one battles, utilizing a combination of punches, kicks, and special abilities to defeat their opponents. Success hinges on precise timing, strategy, and the execution of combo moves to outmaneuver opponents.
• Dream Three Kingdoms 2 is a strategy game set in ancient China. It challenges players to navigate the intricacies of diplomacy, warfare, and resource management to build their kingdoms and defeat their rivals.

Context: Originally scheduled to take place in 2022, the 19th Asian Games were delayed until this month due to COVID-19 travel restrictions.

• Vivo’s sub-brand iQOO has been chosen as the official Esports gaming phone provider, which means that all contests at the international event will use their flagship smartphones.

On Thursday, NetEase announced in its unaudited financial results for the second quarter that it had generated RMB 24 billion ($3.3 billion) in revenue, a 3.7% increase on the same period in 2022. Net revenue from games and related value-added services amounted to RMB 18.8 billion ($2.6 billion), representing a 3.6% year-on-year increase.  Games accounted for 78.3% of the company’s total revenue.

Why it matters: In the second quarter, NetEase’s games, including flagship titles Fantasy Westward Journey series and Eggy Party, performed steadily. NetEase’s two new hits Justice and Racing Master were only launched in late June so their contributions to the company’s gaming revenue will show in the next quarter. With the revenue from the new titles, NetEase Games’ third quarter performance is expected to accelerate. 

Details: According to the financial reports, NetEase’s net revenue from mobile games accounted for approximately 73.6% of its online games income in the second quarter. 

• Eggy Party continues to explore the combination of UGC (User Generated Content) ecology and AI technology. Game makers recently updated the UGC map editing function using AI, drawing in 26 million players to participate in creating new gaming maps, according to NetEase’s WeChat account. Declaring that Eggy Party was China’s most downloaded mobile game in Q2, as reported by local media outlet GameLook, NetEase now hopes to  promote it in the European, North American, and Japanese markets this year.
• Released on June 30, open-world martial arts game Justice gained around 40 million domestic players in July. The game employs AI generated avatars and dialogues. Young players have flocked to the game, generating huge amounts of UGC content on social media. On micro-blogging platform Weibo’s discussion forum, Justice ranked fourth in terms of popularity for mobile games at time of writing, with 544,000 posts from players.
• Racing Master topped the iOS download list in China for 10 days following its domestic debut on June 20. According to the game’s Weibo account, its pre-registered players exceeded 30 million on June 17. The company is expected to start overseas testing soon.
• NetEase took the opportunity of unveiling its latest results to announce a brand new free-to-play open-world RPG title Project Mugen, for which pre-registration opened for players globally on Thursday.
• A trailer for the action-adventure game highlighted its anime stylings and a high-quality open cityscape supported by Nvidia DLSS 3 technology, according to GameLook. Project Mugen reportedly marks the first domestic GTA (Grand Theft Auto) game using AI technology that combines racing, parkour, role-playing, and combat in the open-world of an urban city. The industry is viewing it as an upcoming competitor to HoYoverse’s Genshin Impact in revenue terms.

Context: In July, NetEase’s Justice secured third place in the global mobile game market by revenue with a figure of $113 million, according to analytics firm SensorTower. 

• As for July’s iOS mobile game revenue charts in China, NetEase’s Justice, Racing Master, and Eggy Party ranked second, ninth, and eleventh respectively.

Crystal of Atlan (CoA), the new action role-playing game developed by ByteDance’s video game company Nuverse, was the eighth best-selling mobile game on iOS in China in July, according to local media outlet GameLook, despite only launching on July 14. 

Why it matters: The new game has the potential to be a breakout hit for ByteDance, which has been aiming to develop its own successful mobile title in the wake of HoYoverse’s global success with Genshin Impact. In the second half of July, Crystal of Atlan’s revenue only ranked behind Tencent’s Honor of Kings, NetEase’s Justice Online, and Tencent’s PUBG Mobile, GameLook reported. Fueled by the success of the new game, Nuverse’s July revenue saw a remarkable 109% month-on-month increase.

Details: Based on data from Sensor Tower, CoA’s iOS revenue surpassed RMB 210 million ($29 million) in July. GameLook predicted that the revenue across all platforms amounted to RMB 600 million ($83 million) for the same month.

• Crystal of Atlan is an action role-playing DNF (Dungeon ’n’ Fighter) game that uses 3D graphics and open-world scenarios. Its anime style resembles Genshin Impact and Honkai: Star Rail, both of which were launched by HoYoverse.
• In May, according to CoA’s official Weibo account, the number of pre-registered players reached 8 million.
• ByteDance is actively promoting the game on its short-video platform Douyin (the Chinese version of TikTok), using internal advertising resources to enhance the game’s visibility. A large number of gaming KOLs introduced the gameplay via videos and broadcasts on Douyin to attract domestic players. 
• As of August 8, the hashtags #CoA and #CrystalofAtlant have collectively reached more than 3.5 billion views on Douyin, according to a report by 36Kr. Additionally, ByteDance also recruited KOLs on Chinese broadcast platforms Huya and Betta, to increase publicity for the game. Given the outlay on marketing, some analysts have suggested that maintaining the title’s high profile may prove a challenge in the months ahead.

Context: ByteDance established Nuverse in 2019, announcing its entry into the gaming sector. In 2021, ByteDance acquired game studio Moonton and C4games for RMB 10 billion and equity worth RMB 15 billion, according to 36Kr.

• On July 13, Moonton launched the fantasy role-playing card game Watcher of Realms in the global market. The revenue of this game reached approximately RMB 70 million ($9.6 million) in the first month, according to GameLook.
• In 2023, NetEase’s Justice Online and HoYoverse’s Honkai: Star Rail are the two most prominent new titles in China’s mobile game market.
• In July, Justice Online, the martial arts role-playing game launched by NetEase on June 30, ranked seventh with a revenue of $63.3 million.
• In May, Hoyoverse’s new hit game Honkai: Star Rail earned approximately RMB 1.2 billion ($168 million) in the first month since its global launch on April 26.

Chinese tech giant Tencent has acquired Japanese game developer Visual Arts (Kabushikigaisha Bijuaru Atsu), a specialist in galgame (female anime character-based games) and visual novels. The Osaka-based developer announced the news on Chinese social platform Weibo on Thursday. 

Why it matters: With Tencent’s acquisition, Visual Arts has said it will be able to reach a wider audience and explore new growth opportunities. Tencent, meanwhile, will further its aim of becoming a global gaming powerhouse by acquiring another reputable developer after a series of such moves in recent weeks. 

Details: Visual Arts’ announcement on Thursday coincided with confirmation of the retirement of its founder Takahiro Baba, which was initially revealed last year. Baba has reportedly transferred his controlling stake to Tencent, with Genki Tenkumo announced as the new CEO. 

• Founded in 1991, Visual Arts was at the forefront of the Japanese animation style galgame, a subgenre of dating games and visual novels focused on romance, typically marketed to heterosexual men. 
• Visual Arts is the parent company of Key, which is known for creating acclaimed works such as Kanon, AIR, and Clannad.
• Most Visual Arts games are characterized by a sentimental storyline. Kanon, AIR, and Clannad are all titles that were adapted into animations by Japanese studio Kyoto Animation, which has significant influence among ACG (anime, comics and games) groups.
• Heaven Burns Red, the company’s 2022 turn-based role-playing game, once topped Japan’s iOS bestsellers list, according to Jiemian.
• In the announcement of the Tencent deal, Takahiro Baba said the company was “in the best condition ever.” With the help of Tencent’s investment, Visual Arts hopes to create classics that spread across the world, he added.

Context: Tencent, China’s biggest gaming firm, has been expanding its international footprint in recent months, adding to its majority ownership of Riot Games with a series of major deals. 

• On July 5, Tencent invested an unspecified amount in Lighthouse Games, which will support the UK game studio to build an as yet unnamed forthcoming title. Lighthouse Games is a recently-opened triple-A studio from Playground Games co-founder Gavin Raeburn.
• Weeks later, on July 24, Tencent announced that it had become the majority shareholder in Techland, the Polish studio behind the popular game Dying Light. 

NetEase’s new mobile martial arts game Justice has rapidly gained popularity after launching in China on June 30. The role-playing game has consistently ranked in the top three of the App Store’s free download game list and best-selling game list since its release.

Why it matters: Justice is being tipped as NetEase’s answer to Tencent’s Honor of Kings and HoYoverse’s Genshin Impact. The Chinese gaming giant also used AI to generate in-game dialogue and interactions with non-player characters (NPCs). 

• NetEase’s flagship game in 2023, Justice achieved 40 million pre-registrations before its launch, according to its official account on social media platform Weibo. A flood of about one million online players crashed the game’s servers temporarily on the first day of its launch. On July 7, it topped the best-selling iOS game charts. 

Details: Set in China’s Song dynasty, Justice’s mobile version integrates diversified elements of imperial Song culture, including martial arts, mythical creatures, and traditional architecture. NetEase has said it will update the game regularly for at least the next ten years in a bid to build an adventurous martial arts fantasy world and serve millions of mobile players.

• Players can customize their characters’ avatar through AI-powered settings, choosing various facial features, graphics, and literal descriptions. For instance, when players upload a portrait of themselves or input the requirements of ideal facial features, the system will generate a unique character in seconds.
• Set in an expansive open world, players can choose from a range of game modes, such as instance dungeon, battles, puzzles, relationships, card collection, architecture building, farming, and map exploration.
• Currently only available in China, Justice’s other significant feature is the use of AI to generate in-game dialogue and enable unique reactions from NPCs. Every action taken by players may have an impact on the game plot, the open world’s order, and NPCs’ behavior, NetEase has said.
• Justice’s advertising budget amounted to RMB 46.2 million solely on June 20, a source from the game project has revealed. The general advertising fee of RMB 170 million ($23.49 million) on all platforms includes RMB 23 million ($3.17 million) on Douyin (the Chinese version of TikTok) and RMB 20 million ($2.76 million) on Weibo.
• According to market analysis platform DataEye, the iOS version of Justice reached an estimated RMB 25.85 million ($3.57 million) in revenue on the first day of its launch.

Context: NetEase’s net revenues from games and related value-added services were RMB 74.56 billion ($10.8 billion) for the fiscal year 2022, with mobile games accounting for approximately 67% of net revenues from the operation of online games.

• On May 20, NetEase unveiled 11 new games and updated 35 existing titles at its annual product launch event. In addition to Justice, the company also plans to launch another wuxia (martial arts fantasy) game called She Diao in the second half of this year.

Asus subsidiary ROG (Republic Of Gamers) launched its first handheld gaming console called the Asus ROG Ally at a summer product launch event on Monday. Equipped with a customized AMD Ryzen Z1 Extreme processor, the company claimed  its new product’s performance was on a par with the PS5 game console. 

The handheld device runs on a Windows 11 system, supporting game platforms Steam, Epic Games, Xbox, and GOG among others. Gamers can also explore Android mobile games through the software Tencent mobile game simulator. Asus initially unveiled a global version of the ROG Ally on May 11, priced at $699; the device will sell at a comparable price point in China.

Why it matters: The Asus ROG Ally is one of the most widely anticipated handheld gaming consoles to launch this year, with the company positioning the device as a rival to the Steam Deck and Nintendo Switch. Asus has been a major player in the PC space for years and will hope to boost the reputation of its new venture by making a positive impact in the world’s biggest gaming market.

Details: With multiple functions, the ROG Ally is essentially akin to a portable Windows 11 PC rather than a handheld gaming console. Players can play games, browse the internet, download files, and run programs. 

• Built on a cutting-edge 4nm processor, the customized AMD Ryzen Z1 Extreme processor features both Zen 4 architecture and RDNA 3 graphics. The Ally boosts high frame rates and strong image quality. 
• The ROG Ally screen features a 7-inch LCD display with 1080p resolution, a 16:9 aspect ratio, 500 nits of peak brightness, and a 120Hz refresh rate. Asus claims a 7ms response time and 100% coverage of the sRGB color space.
• The device weighs approximately 608 grams and is equipped with two fans, allowing better cooling at slower speeds to keep noise to a minimum.
• The new console comes with dual Dolby Atmos speakers and AI Noise Cancellation, which processes both incoming and outgoing audio to filter errant background noises from voice chats.
• The console comes with a 40Wh battery that Asus claims gives it up to two hours of life when playing heavy gaming titles. The ROG Ally comes with 16GB of LPDDR5 memory and 512GB of solid state storage, and can be upgraded with a microSD card. It is fully compatible with Steam, Xbox Game Pass, Epic, and GOG, among other platforms.

Context: Established in 1989, Asus is a Taiwan-based company known for personal computers and monitors. It founded ROG as a gaming brand n 2006. 

• According to market analyst firm Canalys, as global PC shipments declined by 16% year-on-year to 285 million units in 2022, Asus ranked in the top five, albeit also declining on 2021 shipments by 4%. Asus occupied a 7.2% share of the global PC market in 2022, selling 20.61 million units.

On Monday, Chinese game developer HoYoverse announced its first ever international tournament for hit game Genshin Impact, with an event entitled Astra Carnival: The Prince Cup. The qualifying round for the tournament is already underway, with regional games being played over the next few months in Europe, North America, South America, Japan, South Korea, and Southeast Asia.

Why it matters: This is the first international tournament to be held by HoYoverse and marks the Chinese game developer’s first foray into e-sports. Genshin Impact has been hugely  popular since launching worldwide in September 2020.

Details: Astra Carnival: The Prince Cup will bring together players from across the globe to compete for a prize pool of $270,000. Three cross-regional invitational tournaments are scheduled to take place in June, August, and December.

• The tournament will be based around Genius Invokation TCG, the card game mode of Genshin Impact. Genius Invokation TCG released its  game version 3.3 in December 2022 based on the Genshin Universe, using existing lore, quests, and characters. In the latest Genshin Impact 3.7 version update, released on May 24, over 60 new cards and two game modes have been added.
• The trading card game uses turn-based battles. Players need to build a deck with a combination of three character cards and 30 action cards, and win by knocking down all the opponent’s character cards. 
• The North America regional competition began on Monday. It will run until June 17, with 32 players battling it out in online qualification matches. The top eight will be invited to Los Angeles to participate in offline championship matches, with all travel expenses covered, according to HoYoverse’s announcement.

• HoYoverse has said that the matches will be livestreamed on AstraCarnival’s social media channels, including on Twitter, Twitch, TikTok, and YouTube.

Context: In 2022, there were approximately 50 million players playing Genshin Impact on a monthly basis, according to ActivePlayer. 

• By September 2022, two years after its launch, Genshin Impact had generated $3.7 billion in revenue across the App Store and Google Play, making it the third-highest revenue-generating mobile game worldwide, according to Sensor Tower.
• China’s biggest gaming company Tencent Games has been involved in major tournaments for hit titles such as League of Legends for the past decade. In April, Tencent Games announced the 2023 Honor of Kings International Championship, featuring a prize pool of $10 million, the biggest prize pool ever for a mobile game event.

NetEase Games unveiled 11 new games and updated 35 existing titles at its annual product launch event, held online on May 20. Particularly notable among them were two new wuxia (martial arts adventure) games — Justice and She Diao — based on classic novels by renowned authors Woon Swee Oan and Jin Yong.

Why it matters: In recent years, wuxia games have become a hugely popular genre in China. NetEase is also looking to bring some of its most successful games to international markets and to emulate the recent success of Eggy Party, which saw the highest number of daily active users in NetEase history in February. To increase its global appeal, the event was also streamed in English and Japanese via YouTube and Twitter.

Justice and She Diao: NetEase has invested RMB 800 million ($114 million) over the last four years into the development of Justice, an MMORPG (massively multiplayer online role-playing game) wuxia title. 

• Set in a world of martial arts, magic, and ancient Chinese mythology, Justice sends players on a journey to uncover the truth behind a great conspiracy and fight their way through hordes of enemies. The game is based on the famous wuxia literature works of writer Woon Swee Oan (also known as Wen Rui’an). 
• Justice is being billed as having the first intelligent NPC (non-player character) system in China’s gaming industry. Players can interact with AI-controlled NPCs as they explore the game’s world.
• The game will be launched on June 30, with the number of pre-registration players already exceeding 30 million.
• Another anticipated open-world wuxia game is She Diao, which is based on the famous martial arts novel The Legend of The Condor Heroes, written by Jin Yong. According to NetEase, the game uses classic characters and novel plots, and allows players to explore the landscape of the Song Dynasty with a suite of exclusive martial arts moves. A release date for She Diao has not yet been announced.
• Other new game titles released in the event are real-time simulation racing game Racing Master, role-playing game Raid: Shadow Legends, open-world fantasy game Qi Feng Travelers, competitive survival shooter game Badlanders, basketball game Dunk City Dynasty, 2v4 competitive stealth game Mission Zero, multiplayer online role-playing game Lord of Dragon, geo-strategic simulation game Infinite Borders, and post-apocalyptic shooter game Ashfall.

Context: NetEase’s net revenues from games and related value-added services were RMB 74.6 billion ($10.8 billion) in 2022, compared with RMB 67.8 billion ($9.64 billion) the year before, representing a 10% yearly increase, according to its fourth-quarter financial report.

• In March 2023, Eggy Party demonstrated huge potential by becoming the 18th highest-revenue mobile game globally despite still only being available in the China market.
• Eggy Party is a casual game for mobile devices that involves competing against other players to reach the end of each stage while avoiding various obstacles. The game earned nearly $30 million in March, which helped NetEase become the second biggest Chinese mobile game publisher by revenue, according to Sensor Tower. 
• Recently, NetEase announced the overseas launch of Eggy Party on April 21, starting in the Philippines, with more regions and platforms to follow this year.

Chinese tech giant Tencent reported strong growth in gaming revenues in its first quarter earnings released on Wednesday. Overseas gaming revenue was up 25% year-on-year to RMB 13.2 billion ($1.88 billion), while gaming revenue in the Chinese market rose by 6% year-on-year to RMB 35.1 billion ($5 billion). 

Overall, Tencent surpassed analysts’ expectations with its first-quarter financial results. Total revenue for the company amounted to RMB 150 billion ($21.8 billion), representing an increase of 11% year-on-year. Net profit came in at RMB 33.4 billion ($4.9 billion) on a non-IFRS basis, up 27% yearly. 

Why it matters: The gradual recovery of Tencent’s gaming business was a key factor in the tech major’s upbeat performance, with the unit reversing its trend of negative growth in the last three quarters. Tencent’s release of new games such as Triple Match 3D and updates to existing hit games has helped generate healthy revenues for its overseas gaming business.

Details: In the first quarter of 2023, Tencent’s revenue from games reached RMB 48.3 billion ($6.9 billion), up 11% up year-on-year. The company’s average daily gaming revenue exceeded RMB 500 million ($71 million) in the first quarter of 2023, according to the figures.

• Tencent’s domestic gaming revenue during the period rose 6% year-on-year to RMB 35.1 billion ($5 billion), while its overseas gaming revenue rose 25% to RMB 13.2 billion ($1.8 billion). 
• Revenue from domestic games came mostly from established titles such as Honor of Kings, Dungeon and Fighter, CrossFire Mobile, and Arena Breakout. In the first quarter of 2023, Honor of Kings released new paid-for skins based on Shan Hai Jing (a classic compilation of mythological Chinese geography and beasts) using targeted marketing, which the firm credited with helping Honor of Kings boost its income. In January 2023, Honor of Kings earned $250 million globally from Apple’s App Store and Google Play, ranking first in the global mobile game best-selling list, according to market intelligence firm Sensor Tower. Revenue from iOS downloads in China accounted for 94.1% of this total.
• Fight of the Golden Spatula, Tencent’s self-developed mobile auto battler spin-off of the popular Teamfight Tactics released in 2021, was another highlight for the company, increasing its gross revenue by 30% year-on-year in the first quarter and topping 10 million average daily active users in April 2023.
• Revenue from Tencent’s international games was mainly driven by the strong performance of Valorant and PUBG Mobile. The first-person tactical hero shooter game Valorant increased monthly active users with the release of a new map and a new agent during the first quarter. Tencent’s financial report stated that the title’s gross revenue increased by 30% year-on-year in the first quarter, helped by popular Japanese- and alien-themed weaponry.
• PUBG Mobile ensured its growth in daily active users during the first quarter with new combat features and enhanced multi-player modes. Tencent introduced a map editing tool to facilitate user-generated content, increasing the game’s user engagement and time played.
• The report also provided an update on Tencent’s protection program for underage players. Minors accounted for 0.4% of total time played and 0.7% of total gross earnings for domestic games during the first quarter, down by 96% and 90% respectively from the same period three years ago. The Chinese government introduced a set of regulations in August 2021 ordering gaming companies to ban underage users from playing on weekdays and allow them only an hour of play time between 8 p.m. and 9 p.m. on Fridays, weekends, and public holidays.

Context: At Tencent’s annual gaming conference Spark 2023 this week, the Chinese tech giant introduced updates on 15 previously announced titles and revealed 20 new projects. The previous titles included Honor of Kings, Arena Breakout, Moonlight Blade, and SYNCED. The conference also featured more renowned imported titles, namely Valorant, Lost Ark, and Alchemy Stars. The company was keen to emphasize the “social value” of its gaming arm at the event, as the industry continues to emerge from a lengthy period of regulatory scrutiny.

• The National Press and Publication Administration (NPPA), China’s gaming regulator, announced 86 new licenses for domestic games on April 20 this year. Currently, 347 domestic games and 27 imported games have been issued with licenses so far in China in 2023, compared to 513 game licenses for the whole of 2022. The renewed issuance of licenses is seen as  a significant sign for the recovery of China’s gaming industry.
• In the fourth quarter of 2022, Tencent’s domestic gaming revenue was RMB 27.9 billion ($3.9 billion), a decline of 6% year-on-year. Revenue from international games reached RMB 13.9 billion ($1.9 billion) during that period, representing an increase of 5% year-on-year.

On Monday, Tencent Games held its annual gaming conference Spark 2023 online, introducing dozens of new gaming-related titles and projects. The Chinese gaming giant also highlighted a slew of “social value” projects using gaming technology, in an attempt to show that the gaming industry can have a positive impact upon society as it emerges from a lengthy period of regulatory scrutiny in China. 

Why it matters: China’s gaming industry has faced heavy regulation since the summer of 2021 but saw signs of this easing earlier this year as licenses for new games continued to return to regular levels. Tencent Games, the leading company in China’s gaming sector, is eager to prove to the regulators that the industry can provide value to society, outside of just producing popular entertainment. 

Details: Tencent introduced a series of new projects using gaming technology for “social value,” including a flight simulator, a game-driven robot-learning project, a 3D online tour of the Great Wall, and games related to clinical research. The gaming unit also announced 26 updates on its more traditional gaming titles, including new games and new updates on hit titles such as Honor of Kings.  

• Tencent will launch a full-motion flight simulator next month. The simulator is based on a gaming engine developed by Tencent Games’ CROS (Common R&D and Operation Systems) unit and was created jointly with Nanhang Xiangyi, a subsidiary of China Southern Airlines. Tencent said during the event that the simulator aims to create a more realistic and efficient training scenario for pilots.
• A new robot-learning project initiated by Tencent Games’ START Team and Tencent Robotics X Lab was also announced. It uses AI to generate the actions and decision-making of the robots, combining gaming and robot development. Tencent claims that the training efficiency of a single robot is improved by 20 times after CPU optimization via the project.
• Tencent’s online tour of the Great Wall combines photo-scanning modeling, game engine, and cloud gaming technologies. The project uses gaming technology to achieve fine-detailed rendering and immersive digital imagery usually seen only in AAA games rather than cultural heritage projects. The tour is accessible through a mini-program on WeChat and has received more than 40 million views since it was launched last June. The project won one of the 2022 Global Awards for World Heritage Education Innovative Cases awarded by the United Nations Educational, Scientific and Cultural Organization. The gaming giant also unveiled a similar project featuring detailed scans of the historic Buddhist artworks at the Unesco-protected site of the Mogao grottoes near Dunhuang.
• Another “social value” project came with the showcasing of narrative puzzle game Pavlov: Brain’it On, which looks to harness clinical research to “help players exercise various cognitive capacities, such as attention, thinking speed, memory, inductive reasoning, and spatial imagination,” according to Tencent. The title was developed by the Chinese tech giant’s Social Value Exploration Center in collaboration with NExT Studios and the Tianqiao and Chrissy Chen Institute (TCCI).
• The firm’s Social Value Exploration Center also worked on Room 301 NO.6, which aims to help the public better understand the world of Alzheimer’s patients. The narrative game “allows users to experience, feel, and understand the lived experience of patients with Alzheimer’s,” Tencent claims.
• In terms of new out-and-out gaming titles, Valorant and Lost Ark attracted significant attention at the event. Valorant is a first-person tactical hero shooter game developed and published by Riot Games in 2019, but which will now be available in China for the first time after Tencent announced a distribution deal. Valorant hit a new record with an estimated total of more than 20 million active players throughout April 2023, according to Tracker Network. The China version will start beta testing in June.
• Lost Ark is a 2019 MMO (massively multiplayer online) action role-playing game co-developed by Tripod Studio and Smilegate. Lost Ark will be launched for the Chinese market this summer, with unlimited pre-release reservations now open. In February, Lost Ark recorded more than 1.3 million concurrent players on Steam, according to Studio Loot. With this number, it overtook CS:GO to claim second place in the all-time concurrent peak charts, behind leader PUBG.

Context: The National Press and Publication Administration (NPPA), China’s gaming regulator, announced 86 new licenses for domestic games in April, the latest sign that the licensing freeze that spanned August 2021 to April 2022 has now thawed. But despite a return to relative normalcy, many gaming companies are still feeling the pressure of a tighter approval environment. 

• Facing heavy regulation and stagnant growth at home, Tencent Games has been accelerating its expansion in overseas markets in recent months. In March, it brought its highest-grossing mobile game in China, Honor of Kings, to Brazil, where it quickly became the most downloaded mobile game in the country.

Following the global success of Genshin Impact, Chinese game developer HoYoverse published new title Honkai: Star Rail on April 26. The game is an anime-styled science-fiction gacha title. Players of gacha games, a reference to Japanese toy vending machines, use in-game currency to purchase virtual boxes that contain a randomized selection of characters, weapons, and other rewards. 

Honkai: Star Rail is available on PC, PlayStation 4 and 5, iOS, and Android devices. In this new title, HoYoverse blends open-world and turn-based mechanics to create a different type of anime game to its famous predecessor. At first glance, Genshin Impact players might find some familiarity due to style and user interface, but a deeper exploration of Honkai shows it offers a genuinely alternative experience. 

An unskippable storyline

Honkai: Star Rail is the fourth instalment of the Honkai series, drawing on characters from Honkai Impact 3rd and Tears of Themis, and gameplay elements from Genshin Impact. New players who are not familiar with the previous titles in the series might be a bit overwhelmed to start, with novices needing some time to digest wordings and worldview settings. But the game’s narrative becomes simpler after the prologue, as the story transitions into the stage of planetary adventures.

The game is set in a fantasy universe where humanity follows in the paths of godlike beings called “Aeons,” in an attempt to stop a pervasive corrupting force, the “Fragmentum.” In the game, players take on the role of “Trailblazers,” waking up without memory aboard a space station. You discover your body contains a destructive matter called “Stellaron” and join a band of adventurers, traveling between planets aboard the “Astral Express,” a space-train.

The game’s characters have distinct personalities and the main story is fast-paced. Humor is a key feature of HoYoverse’s game, with NPCs messaging you to lighten the mood while the main storyline unfolds. Some players may feel like the asides, seen in props and messages, waste time or aren’t especially funny, preferring pure combat. Others will enjoy chatting to NPCs to deepen the sense of immersion.

The game’s plot and script have room for improvement. Not being able to skip along in the plot and having to wait for a character’s action to finish before clicking on the next line of dialogue can be frustrating. Additionally, players can only obtain the first accessory character gifted by the system after several hours of story, by which time an impatient beginner may have abandoned the game due to perceived lack of progress. 

An array of gacha characters

Honkai: Star Rail currently offers 28 characters, categorized in the following seven elements: lightning, ice, fire, wind, imaginary, quantum, and physical. Thus, players have plenty of choice when it comes to building a team. 

Desired characters and weapons acquired through the gacha system are called Warps, and you need to spend specific types of in-game currency to get a Star Rail Pass. With this, players can unlock four or five star characters. In-game lolly accumulates the more you play, or you can choose to accelerate the process with fiat currency.

It’s possible to complete the entire game without spending a cent, but it’s hard to ignore the temptation of in-game purchases. It is especially difficult to resist the urge to buy Star Rail Passes if you’re obsessed with character collection or weapons upgrading.

The alternative is putting in long hours and putting up with a degree of drag in the story. 

Strategy over action

The major difference between Genshin Impact and Honkai: Star Rail is how combat works. Genshin Impact is a third-person real-time action game, whereas Honkai is a turn-based strategy game. Players build up and control a team of four characters in turn-based combat. 

When in combat, you take turns attacking each character and performing actions one by one. The same rules apply to your enemies. You therefore have to rely more on strategy to win your battles. Different character skills, elements, and order of play may have a different impact. The battle scenes are compelling, but there’s also an option for double-speed and automatic mode for these scenes, enabling you to speed the battles along if you want.

Players can move around various locations to explore tasks, but it is not a fully open-world game. There are various locations where you can teleport from one region to another but they are not interconnected.

Stunning visuals

The aesthetics and immersive worlds that HoYoverse has previously built have been major factors in the company’s  success. Like Genshin Impact, Honkai has stunning graphics, with detailed character designs and lush environments, making it a treat for the eyes. The exquisite surroundings and backgrounds keep you engaged in the anime sci-fi world. 

Each location is markedly different from the others, again keeping exploration enticing. The treasure chests in the anime world are abundant as well, continuously motivating you to find out more. 

Conclusion

Overall, Honkai: Star Rail has done its makers proud, meeting the high standards set by Genshin Impact. With an intriguing sci-fi narrative, high-quality visuals and an addictive gameplay system, its players should be satisfied for some time to come. In terms of content optimization, HoYoverse needs to put its mind to work if the company wants to emulate its most famous title’s popularity and keep active players hooked for the foreseeable future.

HoYoverse, the developer behind smash hit Genshin Impact, has seen its latest game, Honkai: Star Rail, leap to the top of Apple’s App Store download charts following its launch on April 26. Initially teased on April 23 and now available worldwide in beta mode, the game has already garnered high expectations, amassing more than 30 million pre-download reservations after it was first announced. 

HoYoverse is also exploring the use of AI tools to achieve a better immersive game experience for the new title, according to National Business Daily. For example, the team has been trying to incorporate AI technology into the behavior patterns of NPC (non-play characters) in Honkai: Star Rail. 

Why it matters: HoYoverse’s Genshin Impact, an anime-style role-playing game (RPG), has consistently brought in sizable revenue for the company. This new game has the potential to widen HoYoverse’s lead in anime RPG games. On April 23, Honkai: Star Rail topped the free download list in Apple’s App Store in more than 113 countries and regions including the US, Japan, and South Korea, according to Chinese media outlet National Business Daily. 

Details: The fourth installment of the Honkai series, Honkai: Star Rail is a space fantasy game featuring fantasy elements with myths and legends integrated into a sci-fi storyline. Players can control up to four characters and form a team by themselves. The game includes elements of open-world, dungeon exploration, and turn-based strategic combats.

• HoYoverse is keen to emphasize that Honkai: Star Rail is not a direct sequel to its previous title Honkai Impact 3rd. While the two games share themes, elements, and characters, the producer says the new title is an independent game and players don’t need previous knowledge of other Honkai titles. 
• Honkai: Star Rail and Genshin Impact do share some similarities, but the two games differ in their combat scenarios. Genshin Impact is more of a third-person action RPG, whereas Star Rail is a turn-based RPG.
• Honkai: Star Rail released an official trailer called Interstellar Journey on YouTube on Tuesday, reaching 1.3 million views in around 24 hours. 
• HoYoverse plans to widely market the game in the following months, introducing the new title at  events including LA’s Anime Expo, Japan Expo, Germany’s Gamescom, and Tokyo Game, according to an official press release. 

Context: Genshin Impact ranked third on the global list of highest-earning mobile games in March 2023, according to Sensor Tower. The same data showed that 50.2% of the title’s revenue comes from the Chinese iOS market, with the Japanese market accounting for 20.2% and the US market accounting for 9%.

China’s largest gaming firm Tencent can finally advertise on ByteDance apps, according to online gaming analytics platform DataEye, a new milestone in the two companies’ relationship. ByteDance and Tencent have competed fiercely over the years, barring each other from cross-promotion and regularly engaging in legal wrangles. As a result, Tencent games have had limited exposure on ByteDance platforms, while ByteDance’s apps have had little publicity on Tencent platforms. 

The latest advertising data shows that Tencent’s war game Return to the Empire and multiplayer role-playing game Naruto have been advertised on Bytedance’s Douyin (China’s TikTok twin), news app Toutiao, and Xigua Video in the past seven days. 

Why it matters: The relationship between Tencent and ByteDance has long been tense due to their rivalry in content, video, and gaming. Recent developments show the two companies are moving toward a reconciliation after years of bitter competition. 

• On Feb. 7, Douyin and Tencent Video announced an unexpected cooperation, in which the two parties will jointly explore the promotion of videos and the secondary creation of short videos. Tencent has issued a long-term video copyright authorization to ByteDance and clarified secondary video creation rules. On Tuesday, Tencent was able to register the official account of Tencent Video on Douyin. The partnership deal between the two companies has even become a hot topic on microblogging platform Weibo. 
• Such reconciliation was unthinkable a few years ago. In the second half of 2021 alone, Tencent sued Douyin 168 times for video rights infringements, with compensation reaching almost RMB 3 billion (or $430 million). 

Details: Tencent’s game Return to the Empire has started to place advertisements on ByteDance’s Toutiao and Xigua Video in recent days. The game had previously been advertised mostly within Tencent’s platform, according to DataEye statistics. In addition, ByteDance’s Douyin accounted for about 15% of the gaming ads distribution for another Tencent game Naruto.

• The reconciliation will potentially benefit both sides. Traffic from ByteDance platforms may head in Tencent games’ direction. At the same time, Tencent’s ubiquitous app WeChat could open up to ByteDance and introduce new users to ByteDance apps.
• The promotion of bestselling Tencent games (like Honor of Kings) in Douyin may enrich ByteDance content.
• The move will have repercussions in livestream gaming too. In the future, ByteDance-based games may also enter the WeChat network and WeChat video channel.

Context: Sharing a focus on content and entertainment, Tencent and ByteDance were the top-grossing publishers in global mobile app stores in the first half of 2022. Tencent was the top-grossing publisher in the game and non-game categories, earning about $3.3 billion in the first half of 2022. The figure is almost 153% higher than ByteDance, which came second with $1.3 billion in revenue. Their disputes have been long-lasting: 

• In January 2023, Tencent super app WeChat temporarily blocked users from accessing links to ByteDance-owned short video app Douyin. 
• In June 2021, ByteDance criticized Tencent’s practice of blocking links to its products on WeChat and QQ in an online post, attaching a 59-page PDF file chronicling incidents of blocking in the past three years. 
• In May 2019, Tencent filed two lawsuits against ByteDance, requesting the owner of Douyin stop streaming Tencent’s hit titles CrossFire and Honour of Kings.
• In June 2019, Tencent filed six new lawsuits against ByteDance, demanding the company delete all Honour of Kings gameplay videos from the accounts of six specified users on Toutiao and Douyin. It demanded  ByteDance pay RMB 10.8 million (around $1.56 million) in damages.

On March 8, the highest-grossing mobile game in China, Honor of Kings (HoK), launched in Brazil, marking the Tencent TiMi Studio Group game’s first foray into the global market. The number of pre-registered HoK players in Brazil before the MOBA (multiplayer online battle arena) title’s launch exceeded 2 million, quickly making it the most downloaded free mobile game in the country, according to a report from Chinese financial media outlet Baijing.

Why it matters: The Brazilian launch is a key part of Tencent’s global expansion as the Chinese gaming giant looks to overseas markets amid continued uncertainty at home due to heavy regulation and sluggish consumer spending. The team behind Honor of Kings hopes its experience in Brazil will lay a solid foundation for its future launch in other regions, such as Mexico, Egypt and Turkey, according to Tencent’s overseas game distributor Level Infinite.

• Tencent is increasingly relying on the overseas gaming market for growth. In its 2022 third-quarter financial report, Tencent’s global market revenue reached RMB 11.7 billion, more than one-third of its domestic game revenue RMB 31.2 billion.

Details: HoK released a series of high-quality cinematic trailers on YouTube ahead of its Brazilian launch. The pre-registration trailer Hey Brazil received 2.3 million views on YouTube in its first month.

• Tencent has set up dedicated servers in Brazil for a smoother gaming experience in the country. The firm also employed well-known Brazilian voice actors for the characters in the Brazilian version of Honor of Kings, alongside localization of in-game text, user interfaces, and character designs.
• HoK was released in Brazil on the iOS App Store, Google Play Store for Android, and Samsung Store, with the title offering 5v5 Matchmaking, 5v5 Quick Mode, 5v5 Ranked Match, 1v1 Solo Mode, and a newly created Casual Mode called the Infinite Brawl.
• Level Infinite first announced on Twitter last June that HoK would be launched globally by the end of 2022. However, this was later postponed until this year, with the company partly blaming the Covid-19 pandemic. 

Context: In February 2023, Tencent’s Honor of Kings remained the highest-grossing game app in China, earning about $113 million in monthly revenue. In 2022, Honor of Kings generated over $2.2 billion in revenue, making it one of the top-grossing mobile games of all time.

• At an event celebrating Honor of Kings’ seventh anniversary held in November 2022, Tencent provided new details on its plans to build a “universe” around the hit game, teasing a range of spin-off titles including chess and Street Fighter-style battle games.
• According to Chinese media outlet Sina, Brazil is the largest gaming market in Latin America, generating $1.84 billion in revenue in 2022. Among the gamer population in Brazil, the proportion of young players aged between 18 and 24 is relatively high, accounting for more than 20%, which benefits MOBA games that need a high level of DAUs (daily active users) and appeal to this demographic.
• In recent years, Chinese gaming companies have increasingly looked to overseas markets for growth. In the top 100 list of highest-grossing mobile games in the global market, Chinese game publishers account for 40% of the US market, 43.1% of the Japanese market, and 49.1% of the Korean market, according to Chinese data research firm CNG’s Global Mobile Game Market 2022 report.
• Chinese gaming giant Tencent doubled its stake in AAA game title developer and publisher Ubisoft to around 10% in 2022, a move it followed by taking a 20% stake in Korean studio Shift Up.

READ MORE: Chinese gaming companies go overseas as home growth slows

On Feb. 10, China’s National Press and Publication Administration (NPPA) released its approval list of domestic online games for February 2023 on its official website, with titles by Tencent, ByteDance, and NetEase among those given the green light.

Why it matters: The new list is the ninth batch of games approved in China since the NPPA resumed its issuing of licenses in April 2022 following an eight month pause. As with January, the number of new licenses this month exceeded 80, higher than any month in 2022 and a sign that China’s gaming regulators may be returning to a more consistent approach to approvals after months of uncertainty. 

Details: Some 87 new domestic games have been granted licenses by the NPPA, including 79 mobile games, seven PC titles, and one game for Nintendo Switch. 

• Tencent’s high-profile new game King Chess, a strategy battle mobile game that is part of the company’s attempts to build an Honor of Kings “universe,” was among those gaining approval. The official WeChat account for the game claimed on Feb. 10 that it is still in development and will undergo beta testing in the near future. 
• NetEase, another Chinese gaming giant that has struggled for new title approvals in the past 18 months, saw the mobile version of its massively multiplayer online role-playing game Fantasy Westward Journey make the list of February approvals.
• ByteDance has three new titles on the list: The Leader of the Battle from its publisher Ohayoo; Matrix: Out of Control by wholly-owned subsidiary Nuverse; and Hyper Instant Connection by its newly acquired company C4Games (all titles our translations). 

Context: China’s gaming industry has been sluggish over the past year due to tightening regulations on the industry and strict limits on young gamers.

• The total revenue of the video games market in China slumped 10.33% to RMB 265.9 billion in 2022, while game users declined slightly, down 0.33% year-on-year to 664 million, according to a report by the country’s semi-official games industry association.
• In August 2021, Chinese authorities restricted the weekly gaming hours for minors under the age of 18 to one hour a day on Fridays, weekends, and public holidays.
• China’s eight-month gaming license freeze was lifted in April 2022, but new approvals remained limited throughout the year. Just 513 game licenses, including 468 domestic games and 45 imported games, were issued over the course of 2022, 38% fewer than in 2021 and only a third of those approved in 2020, according to Caixin’s calculations. Tencent, one of the biggest gaming companies in the world, didn’t receive its first major approval of the year until November.

China’s media regulator released its December game licensing list for domestic and imported games on Wednesday. The National Press and Publication Administration approved 84 China-made games and 44 imported overseas games. Among those winning approval, Tencent got a green light for Pokémon Unite, part of the famous franchise co-developed with Nintendo. NetEase also scored several approvals. 

Why it matters: Despite the resumption of gaming licenses in April after an eight-month freeze, China again skipped approvals this year in May and October, and overall approved far fewer games than in previous years. The country approved 468 domestic games this year, 38% less than in 2021 and only a third of those approved in 2020, according to Caixin’s calculations. 

Details: Tencent received approval for one domestic game and five imported games. NetEase got one domestic game and two imported games approved. Alibaba’s Lingxi Game and ByteDance’s Nuverse won approval for one imported game each. 

• Tencent’s NExT studio got its third-person shooting game Synced: Off-Planet approved. The world-leading game developer also won approvals for five imported games: Pokémon Unite, Valorant, Don’t Starve Newhome, The Age of Navigation: Sea Overlord, and Crossfire developer Smile Gate’s Lost Ark.
• NetEase’s Racing Masters, a racing game co-developed with British car game developer Codemasters, also won approval. NetEase also gained licenses for Raid: Shadow Legends and Fantasy Life, two imported role-playing games. 
• Chinese gaming firm Perfect World also won approval for two imports: Two Point Hospital and Dorfromantik.

Context: Although the Chinese regulator has shown signs of loosening the crackdown on the gaming industry that began in August 2021, it is still handing licenses to fewer games and doing so with less frequency than before. 

• This round of approvals was the first time in 17 months that the Chinese regulator gave nods to imported games developed overseas. Last year, the regulator handed out imported game licenses in June, approving 76 games, 42% more titles than on this year’s approved list.

Chinese tech giant Tencent posted its results for the third quarter of 2022 on Wednesday, reporting RMB 140.1 billion ($19.7 billion) in revenue, a 2% year-on-year decline. The figure missed analysts’ average estimation of RMB 141.6 billion, according to Reuters. Profit attributable to equity holders of Tencent for the quarter was RMB 39.9 billion, a 1% year-on-year increase and a significant achievement considering the company saw a more than 50% yearly fall in that figure for the first and second quarters of 2022.

The data follows a number of “adjustments” that Tencent has made to its multiple businesses, and also reveals that its gaming sector, which accounted for 31% of the company’s overall revenue in the third quarter, recorded consistent growth overseas. 

Why it matters: Even as one of China’s most influential technology giants, Tencent is still struggling to fight against the macro downturn. As with other Chinese tech firms, it’s gaming arm has been increasingly looking overseas for growth, investing in international assets and working with partners to develop more titles for global publication. The return on this strategy is now evident in the company’s financial results.

Details: According to Tencent’s financial results, revenue from domestic games continues to fall this year, but international games have consistently contributed to revenue growth. In the past two years, Tencent’s domestic gaming business peaked at RMB 33.6 billion in revenue for the third quarter of 2021. Since then, it has dropped each quarter, mainly due to China’s gaming regulations aimed at minor protection, which include time limits for those under 18 and took effect in Sept 2021.

• For the reported quarter, revenue from Tencent’s domestic gaming business declined 2% quarterly and 7% yearly to RMB 31.2 billion, according to the company’s financial results and our calculations.
• According to Tencent, time spent on gaming by under 18s in China saw a sharp 92% drop in July compared with the same month last year. In July 2022, gameplay time by minors accounted for just 0.7% of the domestic total, the firm said.
• The situation was made more complex by the unpredictable nature of gaming license approvals in the country (the National Press and Publication Administration did not issue any licenses last month). However, Tencent executives struck an optimistic tone on Wednesday’s earnings call, saying that the company had acquired a license in September and believed that there would be more licenses approved soon.
• By contrast, revenue from Tencent’s international games saw steady quarterly growth. For the reported period, there was a 9% quarterly and 4% yearly increase in revenue for the company’s overseas gaming business, generating RMB 11.7 billion. In its most recent financial report, Tencent attributed the data to “robust growth from Valorant, the successful launch of Tower of Fantasy, and an expanded game portfolio at Miniclip, versus decreased revenue from PUBG mobile.”
• Regarding Tencent’s other businesses in the third quarter, CEO Pony Ma stated that “we started to benefit from the adjustments that we have made to reposition ourselves for a new industry paradigm. We activated in-feed advertisements in Video Accounts, and executed cost efficiency initiatives which re-focused us on core activities and controlled our cost growth.” He added that the firm had seen “a growth in non-IFRS earnings after four quarters of decline” due to these achievements, while also highlighting the breakthrough in international games publishing.

Context: Tencent is the largest video gaming firm in China and the second largest in the world by market cap. The tech giant also built a social network empire with QQ and WeChat (Weixin in China).

• Tencent faced mounting challenges relating to policy uncertainty and a macroeconomic downturn in 2022. The company’s stock price dropped to a five-year low by the end of October, according to data from Google Finance. 

• The company announced on Wednesday that it would divest over 90% of its $20.4 billion valued stake in Meituan to shareholders as a special dividend, following a similar divestment from JD.
• In the gaming sphere, the firm made major investments directly or indirectly this year in notable developers and publishers such as Ubisoft, Elden Ring developer FromSoftware, and Subway Surfers developer Sybo.
• Tencent is also building out content universes for its most popular titles Honor of Kings and League of Legends, as an additional means of increasing profit.

Chinese gaming giant Tencent held a special event on Nov. 12 to celebrate the seventh anniversary of its hugely popular TiMi Studio-developed title Honor of Kings. At the event, the firm provided new details about expanding a “universe” of productions related to the hit game.

Honor of Kings became China’s most profitable mobile title in January 2022, taking the crown from another mobile title developed by Tencent, PUBG Mobile. The game generated $190 million in September alone, according to US data firm Sensor Tower. Launched in 2015 in China, Honor of Kings recorded 50 million daily active users in 2016 and then hit 100 million in 2020, according to official data. Tencent brought the game to overseas markets for the first time this year. 

The game’s success has spurred Tencent to pursue a similar strategy used successfully with League of Legends: building and expanding the game’s universe by adding related titles and spin-off products for greater revenue growth.

While the titles shown at the event did not come with specific launch dates, the update was still a positive sign that the projects remain in progress despite the recent challenging regulatory environment for the Chinese games industry.

The event showcased new developments on three gaming titles – Honor of Kings Chess, Honor of Kings: World, and Code: Breaking Dawn – and one animation entitled Brothers Baili (all names are our translations). We’ve outlined the details (that we know of so far) for each below.

Honor of Kings Chess

At the release event, Tencent announced a new chess title based on Honor of Kings. Judging by the computer graphics preview, Honor of Kings Chess is either an auto chess or auto battle gaming title, with gameplay similar to League of Legends’ Golden Shovel (our translation). Players use strategies on the cards dealt to them or chess combos to fight with other players. The title was developed by a unit from the main Honor of Kings title, according to ITHome (in Chinese). 

Honor of Kings: World

First revealed in October 2021, Honor of Kings: World is an open-world RPG title. At the event, Tencent released a new demo video of the gameplay, presenting more details about character skills and the gaming world. Based on this, the title features a stylish art design similar to The Legend of Zelda: Breath of the Wild, with stunning visual effects during combat scenes. The general gaming scenes are also of high graphic quality and look close to an AAA-level title. Some details, such as clothes and grass, display surprisingly realistic physical effects.

The title will be published globally on multiple platforms, according to the description of a previous video released through Tencent’s official Bilibili account.

Code: Breaking Dawn

Code: Breaking Dawn is a fighting game that was first announced in 2020. The game title brings major “kings” from Honor of Kings to a stage for Street Fighter-style player-versus-player battles. At the event, Tencent released a new teaser trailer, demonstrating the skills of some of the characters, including Sun Wukong, Diaochan, and Kai.

However, the title is still in development, and no specific launch date has been set.

Brothers Baili

In addition to the aforementioned gaming titles, Tencent also provided an update on its Honor of Kings feature film series. The first movie, named Brothers Baili, will focus on the stories of the two popular characters Baili Shouyue and Baili Xuance. The movie will dive into the brothers’ childhood, building out the characters’ backstories. 

Based on the trailer, the animation could be presented in a 3D style. According to the description, the trailer involved Huang Chengxi, a notable director and animation artist who worked on 2017’s Boruto: Naruto Next Generations.

Companies have been exploring different gaming and social experiences in the Web3 spaces as they continue to build out the next generation of 3D internet experiences. Ownership and community have been essential to these new experiments, as well as new web infrastructure like blockchain.

Saro Mckenna, co-founder of AlienWorlds, and Mable Jiang, chief revenue officer at STEPN, shared their views on SocialFi and GameFi, and what could be different in from our current internet experience. The panel discussion was a part of the BEYOND Expo 2022 Web3 Summit, held online at BEYOND Metaverse on Sept. 26. 

The text below has been condensed and edited for clarity.

Saro Mckenna, co-founder of AlienWorlds

We think that a blockchain construction is really required to be called a metaverse, because only with a blockchain construction can you have people really coming together, peer to peer, who are not simply there because of a centralized platform owner. 

The first thing that we’re doing inside of the metaverse at scale is gaming. But there are many other aspects of our lives that happen within the metaverse, including education, work of other kinds, and certainly, social interaction is in the metaverse, which we’re already seeing through gaming. 

There has been a lot of content creation and especially novel content creation. People are pushing the boundaries of what technology can do. What I love to see is the way that people come together. People are just so ingenious, and we’ll find a way to add value to any system and to create things. In AlienWorlds, there have been whole companies that have been created servicing the AlienWorlds’ metaverse. Some of them have created leaderboards and competitions that have even been built out a little bit, technically. 

For the social-fi elements, if something’s adding value to a system, I think the question is more about who’s capturing that value – the person themselves or the platform owner. And that’s the real distinction between Web 2.0 and Web3.

So I’m not sure if I would necessarily emphasize the Fi (decentralized finance, DeFi) so much if the person is only involved in the system because they want to earn money. I think that’s potentially the connotation when you put the Fi suffix onto something. It’s more about empowerment and just the next iteration of property rights, and that gets extended into a metaverse environment under blockchain construction. And then everything that results from that, all the potential and creativity, get unleashed when you acknowledge the sovereignty of people’s capturing into the platform itself.

I think one of the things that’s kind of interesting is what we see on social media. People have been pushing the boundaries of that for themselves as influencers, right? So these are people who are like super sharers on social media. And they do manage to monetize a bit of a position for themselves through a lot of hard work. But they’re sort of working against the boundaries of what’s been created. It’s only if they happen to be a breakout success can they earn something like a living wage.

Whereas what we’ve done in Web3, the starting point is that people just own the fruits of what they’re doing beyond that and love how they transfer that value around. So that doesn’t mean that there aren’t paid services or that everything’s free. There are plenty of commercial services that get offered in the metaverse. But people themselves will choose to engage in them. And I think that creates far more creativity [in the system].

Mable Jiang, chief revenue officer at STEPN

I would be actually very straightforward about SocialFi, I actually never liked adding the word Fi after everything. I think that’s a very mimetic way of doing things. When we talked about our product, we just mentioned that there’s like social element instead of SocialFi.

Within the whole metaverse, and regardless of how you define metaverse, not everything needs to be powered by blockchain, that are valuable, and needs to be actually stored and have instant finality will require blocking settlement within what we are seeing today.

There are a few things that actually could be monetized, influence is one of them, such as social graphs. That’s something that could actually be recorded by the blockchain. Also, there are a lot of actual activities that people will try to do to accumulate their social relationships. But those activities, those proof of work, do not really have to be recorded every single step on chain, but rather just a result of it. 

There are a lot of interesting potential things that people could explore around, like anything related to social, and could also be captured by tokenizing the specific names or specific results of that social behavior. But I think the process of it probably will still likely to happen in a Web 2.5 stage.

I do think game-fi or like extra to earn has their own merit to it in a certain historical period of time because it has bootstrapped a lot of users within a short period of time. However, I think if you do want to keep these people within your ecosystem, you do need to think about the question of externality. So then you know it’s about maybe working with external brands, or maybe with like some other lifestyle applications to really give the users who you use the extra to earn kind of models, other things to do, or actually to do something that’s like creating values, or at least like creating values for themselves.

One thing that we were trying was opening our merch store (merchandise), but it’s not just a simple shop on our website. It’s actually going to be rendered by a partner within their actual virtual merch store. And people just go in, and they can buy, and they will have the ownership of that. The NFT is for people to get physical merch. That’s an example of the hybrid model. So I think there are many things that we can obviously leverage and go around with it.

Chinese gaming giant Tencent announced this year’s winning indie games from its Game Without Borders Game Awards (GWB) in mid-August. In its fourth year, the Award is organized by GWB, Tencent’s indie game incubator, and grants cash prizes (up to $72,982) and other benefits to promising Chinese indie game developers. 

Developed by small teams, indie games tend to be less profit-oriented because some developers make them out of passion. Nonetheless, some Chinese indie games can become a hit, such as horror titles like Paper Dolls and Firework, which contain traditional Chinese horror story elements. 

The Award selected 21 titles this year. TechNode highlights five notable games from the list. None of the five titles has an approved gaming license, but Chinese players still have a chance to play them via Steam on desktop. 

Yi Xian: The Cultivation Card Game

Gold Award in card game

The title is an online deck-building game that allows players to become “ancient Chinese gods” as they progress in the game. 

The game is designed with ancient Chinese styles and fictional characters. Previously, a famous Chinese card game called Legends of the Three Kingdoms became a big hit for referencing the Chinese historical novel Romance of the Three Kingdoms, a war period towards the end of the Han dynasty (A.D. 220 to 280). The Yi Xian game is a new attempt to explore different storylines from ancient China. 

Players need to build a new deck from scratch in every game. Decks can be strengthened by changing cards, with the goal of building more powerful routines to defeat opponents and win. The gameplay looks like a combination of auto chess and traditional card games – while it is based on cards, it also includes strategic aspects similar to auto chess, like eliminating players through selection or competition to enhance the gaming experience in multiplayer. 

Hangzhou-based Mo Ri Studio (our translation) developed the game, which also won the Award for games with the most business potential. 

The game also has a notable publisher, GameraGame, which has introduced many well-known gaming titles that have previously excited the gaming community, including Firework and Dyson Sphere Program, two famous indie games. The title has closed its public testing. Tencent told TechNode that the game is coming to Steam in the fourth quarter of this year. 

Murders on the Yangtze River

Silver Award in puzzle game

Murders on the Yangtze River is a detective game set at the end of the Qing dynasty (1912) and developed by OMEGames Studio. Players will find out the hidden truths by solving fictional cases.

The gameplay seems similar to its rivals. Players must find clues and solve riddles to figure out the whole picture of the story. The game art incorporated Chinese artistic style, with characters designed using ink painting.

OMEGames Studio is owned by a Beijing-based gaming firm, Beijing Unifly Culture Innovation, which was founded in 2012. The studio starts developing games in 2019. The title is the studio’s first piece, according to the studio’s page on multiple gaming platforms. The game title launched a demo in July, according to its Steam page. Tencent told TechNode that the title would launch in the first quarter of 2023.

Nobody – The Turnaround

Silver Award in roleplaying game

Nobody – The Turnaround is a roleplaying game that challenges players trying to survive in cut-throat city lives. Players will navigate the game as a newcomer to a metropolis, attempting to make a living. 

According to its official introduction, the game is “set in a parallel world that echoes modern society.” It challenges players to manage resources and time in difficult situations. It also quantifies the main character’s health and emotion, with both requiring complex strategies to maintain good condition.

Developed by a lesser-known team at U.Ground Game Studio, founded in 2020 in Chengdu, the game is their first title and was announced in 2021. The game will also come to Steam in the autumn of this year, according to Tencent.

Mercury Abbey

Bronze Award in puzzle game

Mercury Abbey is another puzzle-solving game. Its pixel art design and anthropomorphic animals might set it apart — a combination that is popular among people who like animation, comics, and games.

Players can roleplay two characters in the title to unravel the secrets behind the nursery by collecting clues and solving puzzles. The pixelated look offers a unique texture and feel. The game is also dialog-heavy, with much of the plot driven by the narrative. 

Founded in 2020, the game’s developer YiTi Games was based in Chengdu. The developer launched a demo of this title in April and will officially introduce it sometime in 2023, according to Tencent. Mercury Abbey is also the developer’s first game listed on Steam. Like Yixian, it is also published by GameraGame.

Five Dimensions

Nomination in puzzle game

Five Dimensions is a puzzle-solving game with simple plots. The core gameplay is designed around the use of highlights and shadows to explore different dimensions on the screen. Players can manipulate the lighting and view angles to control the dimension changes and advance through the game.

The art style uses doodles and sketch looks, using a primarily monochromatic color scheme with a bright yellow accent. 

The developing team comprises six members from top Chinese universities like Tsinghua University and the Central Academy of Fine Arts. The title is in a private testing phase and is estimated to launch on Steam in December of 2023, Tencent told TechNode.

Read more: Chinese indie game developers recreate experiences of Alzheimer’s patients

Oppo-owned phone brand OnePlus introduced OnePlus Ace Pro on Tuesday, the latest device in its gaming lineup. The new phone is a local Chinese version of the OnePlus 10T announced on August 3 for sale in overseas markets.

Why it matters: Chinese smartphone makers are introducing high-performance phones at lower prices. The cheapest phone with Qualcomm’s newest high-end chip was the Realme GT2 Master Explorer Edition, released in July, and the OnePlus now provides a much larger RAM with the same starting price of RMB 3,499 ($520).

• Ace Pro partnered with Unity, a popular gaming engine, to optimize gaming performance.

Details: Built with Qualcomm Snapdragon 8+ Gen 1 and unique cooling tech, the core performance can be promising for gamers, but the model also compromised other specs such as the display. Li Jie, president of OnePlus in China, said at the release event that the firm expects sales of its new Ace series to reach millions of units in China. For comparison, the brand’s number series sold 2.4 million units in China, 36Kr reported on Wednesday (in Chinese). 

• The phone has a 6.7-inch AMOLED display with 1080p resolution and a 120 Hz refresh rate, but it does not fully support the battery-saving adaptive refresh rate technology that rivals in this price range have.
• For the cooling system, Ace Pro introduces a large vapor chamber panel and special cooling materials like graphite and diamond thermal gel.
• The phone has also been verified by Tencent for exclusive use in its League of Legends: Wild Rift and PUBG Mobile events. Previously, OnePlus has partnered with Tencent for the premiere launch of League of Legends on mobile with a 120 Hz refresh rate. 
• However, optimizations for special titles and devices require a lot of work. OnePlus found a way to do this work at the gaming engine and hardware level. 
• To optimize the phone’s performance for demanding gaming titles, OnePlus used technology from Unity, which powers 76% of mobile game titles. Through Unity’s Adaptive Performance interface, the phone can run faster when the game needs more computing resources by reducing frame drops in certain game scenarios. 
• The battery and charging specs are typical for mid-end to high-end phones, and is built with a 4800mAh battery, supporting 150W speed charge tech.
• The Ace Pro with 12 GB RAM and 256 GB storage sells for RMB 3,499. The 16 GB RAM models are available with 256 GB or 512 GB of storage and are priced at RMB 3,799 and RMB 4,299, respectively. 
• For fandom, OnePlus also worked with miHoYo to bring a Genshin Impact limited model to market in October.

Context: The Ace series was a product line of Oppo. OnePlus took over this year and has since launched three models targeting gamers.

• Oppo first introduced the Reno Ace in 2019 and made Ace an independent product line in 2020 with the Ace 2. The two were notable for their charging speed, one of the fastest among rivals.

Oppo sister brand Realme launched a new high-spec phone, the Realme GT2 Master Explorer Edition, on Tuesday, at a relatively low price. 

Why it matters: Oppo’s Realme is known for making phones with high spec combinations at a low price, similar to Xiaomi’s sub-brand, Redmi. The GT2 features Qualcomm’s latest processor and new RAM technology.  

• Gaming features in this phone are also competitive among its rivals at the same price range, making it a good choice for gamers on tight budgets.

Details: Realme GT2 Master Explorer Edition is now the cheapest phone fitted with Qualcomm’s new processor, the Snapdragon 8+ Gen 1, a chip that higher-end Android phones tend to use. The phone sells 12.5% cheaper than three other phones that have used the chip, based on a calculation from TechNode.

• The phone has a 6.7-inch punch-hole display with a 120 Hz refresh rate, supporting on-screen fingerprint recognition. The display, however, has a lower definition than its rivals’ high-end models, a compromise made for cost control.
• One of the phone’s standout features is its adoption of the new LPDDR5X RAM with lower battery consumption, which helps reduce power consumption by 20% more than the previous generation of Realme phones, according to Realme’s Weibo post.
• In gaming features, Realme has adopted imaging chips from US-based firm Pixelworks, which generate extra frames for a smoother performance. This tech also helps offload GPU workload to reduce overall power consumption, which prevents overheating and helps to extend gameplay time on mobile devices.
• The phone also comes with a simulated arm trigger feature with pressure sensors for gameplay which, according to Realme, makes it the first company to use this function worldwide.
• The phone has three back cameras and 100W charge for a 5,000 mAh battery.
• Available in three colors, the phone will be available on July 19, pricing from RMB 3,499 ($520) for 8 GB RAM and 128 GB storage to RMB 3,999 ($595) for 12 GB RAM and 256 GB storage.

Context: Top Chinese phone brands Xiaomi, Oppo, and Vivo, have all established sub-brands like Redmi and Realme, and iQOO to better serve targeted groups that are more price sensitive. 

• These subbrands allowed the main brands to raise prices. For example, the price of Xiaomi phones has grown by around 30% since 2018.
• In the first quarter, Oppo took 22% of the market shares in China’s budget smartphones priced between RMB 3,000 to RMB 3,999 and 27% in phones priced between RMB 1,000 to RMB 2,999, ranking the third according to CINNO Research, a Chinese hardware insight firm.

Nubia, a brand owned by Chinese telecom firm ZTE, upgraded its gaming phone series with the new Red Magic 7S and 7S Pro on Monday. The new models introduce one of the fastest gaming frame rates and a virtual host for streaming as the brand looks to establish itself as a high-end gaming phone maker. 

Why it matters: In an effort to differentiate itself from other gaming phone makers, the new Red Magic models come with special tech to increase gaming frames per second to offer a smoother experience.

• Such a feature is a notable attraction for gamers as similar tech has been widely adopted on gaming computers.
• The phone also comes with a built-in virtual host for mobile gaming streamers, catering to the growing mobile game streaming market.

Details: The Red Magic 7S series’ gaming features are powered by Qualcomm’s latest high-end processor, the Snapdragon 8+ Gen 1, and Nubia worked with a partner to develop the Red Core 1 chip for additional display features. The standard version has up to 16GB RAM and 512 GB storage, while the Pro has options for 18 GB RAM and 1 TB storage.

• Red Magic 7S and 7S Pro both feature 6.8-inch AMOLED displays with 387 pixels per inch (PPI) density, helping to deliver detailed imagery. But the standard version has a better display in terms of refresh rate and maximum brightness, which could be an important selling point for players not willing to spend extra for a Pro. 
• The Red Magic 7S’s display has a refresh rate of 165 Hz and features 700 nits maximum brightness, while the Pro version only has a 120 Hz refresh rate and 600 nits maximum brightness.
• The new 7S series phones are both built with Red Core 1 processors which are developed by Nubia and a Shanghai-based chip design firm Shanghai Awinic Technology.
• The chip was first introduced into the 7 series in February, enabling gaming features such as vibration feedback, customizable touch control, and the ability for lights on the device to sparkle in sync with songs. The 7S Pro has a larger 5000mAh battery with 135W speed charging support, while the standard comes with a 4500mAh one, supporting 120W speed charging.
• The Red Magic 7S comes in two designs while the 7S Pro has four, including a Transformer’s Bumblebee limited edition. Pricing for the new phones ranges from RMB 3,999 ($594) to RMB 7,499 ($1,113) depending on storage and RAM choices.

Context: Nubia introduced the gaming phone series Red Magic in 2018, six years after the brand was first established.

• Red Magic and gaming giant Tencent reached strategic partnerships (in Chinese) to ensure optimized gameplay on the former’s phones in 2021.
• At the release event on Monday, Nubia also revealed that the Red Magic series is currently the top-selling high-end gaming phone (priced over RMB 4,000) in the world, accounting for 51% of the overall market in the first quarter of this year. Asus’s ROG and the Xiaomi and Tencent-backed Black Shark took 36% and 12% of the market, respectively.

Taiwan-based personal computer vendor Asus has teamed up with Tencent to release two new gaming phones aimed at professional mobile gamers. The phones, which go by the name ROG 6 and ROG 6 Pro, were announced on Tuesday, with price ranging from RMB 3,999 to RMB 7,999 ($597 to $1194).

Why it matters: Asus has used its brand, ROG (Republic of Gamers), to build a suite of professional gaming devices, such as laptops, phones, and desktops. The latest phone from Asus, the ROG 6, is backed by Tencent and offers deals for the gaming giant’s titles.

Details: Designed specifically for gaming, the ROG 6 and ROG 6 Pro models have been built with oversized specs, including a maximum of 18GB RAM. The two models have also been built with special designs and features that optimize them for gameplay.

• The ROG 6 and the Pro both use Qualcomm’s latest high-end Snapdragon processor, which runs 15.8% faster than the previous generation of the chip series.
• The phone also features an upgraded cooling system for continuous peak performance. The phone also uses 3300mg of boron nitride between the radio frequency board and the motherboard, a material that can cool the whole device more efficiently.
• Different from the common design of most android phones, which generally feature the main processor at the top of the phone, ROG builds its processors in the middle of the phone, an area where players do not typically hold the phone while gaming. This design ensures better cooling and further limits avoid any overheating scenarios.
• Another notable feature is that ROG 6 and ROG 6 Pro have built-in triggers, similar to those used on a console controller, and updated X-axis rectangular linear vibration motors for feedback, which offers immersive gameplay.
• The battery and charging system on these new phones also optimized the design for gamers. Both models use a 6000 mAh battery, which can be charged via two USB Type-C ports that are built in the middle on both sides of the phones, making it more convenient to play while charging. 
• The phone’s body is designed with a cyberpunk aesthetic, in white and black-themed colors. ROG also launched an extra cooling accessory and a full-size controller for phones with similar designs.
• The two models will be available to buy on July 12.

Context: Launched in 2006, Asus’ ROG focuses on various gaming hardware, from laptops to separate components like motherboards. The brand has become established in communities of spec geeks (people who prioritize high-level performance and metrics in devices) and gamers on its quality and iconic illumination effects.

• During JD’s recent shopping holiday, Asus topped the motherboard sales chart according to Chinese media outlet ZOL.

Editor’s note: A version of this article was first published on RADII.

Three college students in Beijing developed an indie game that put players in the consciousness of Alzheimer’s patients, hoping they will walk away with a better understanding of Alzheimer’s and have sympathy for those who live with the disease. 

The game, titled “Room 301, Building 6”, is an immersive game in which players would experience what it is like to lose a grip on their memories. “This is my home; I’ve always lived here. But even this place is unfamiliar to me,” is the opening line of this meditative indie video game. 

Developed by three students from the Communication University of China in Beijing and published by Gameragame, Room 301, Building 6 started as an experiment on immersion in different states of consciousness. While an official release date has yet to be announced, a free trial of the indie video game is available for PC users on Steam.

Huang Yuhan, one of the game’s developers, told RADII they had several ideas initially but eventually settled on Alzheimer’s, as some of their loved ones have suffered from the disease.

“We have very personal memories, and it was very smooth to express them through the creation of the game,” Huang said.

In the game, players step into the shoes of a retired grandmother on a five-day-long quest to retrieve her memories by finding objects scattered around her apartment. Just as in real life, Alzheimer’s medication can boost the character’s ability to remember, helping players advance in the game. 

“We pondered over it for a long time, but we eventually reached a consensus to prioritize a faithful and unadorned reproduction over conventionally fun gameplay,” Huang said.

The game is split into two screens to simulate the cognitive limitations that plague Alzheimer’s patients. 

On the right, players can only catch glimpses of their character’s apartment instead of seeing the complete picture. This limited visual field serves as a reminder of patients’ shortened attention spans and the difficulties they face in organizing logical thinking. Signifying memory loss, players sometimes need to revisit the same objects. Using the left panel, players must navigate a maze using their keyboards while constantly exploring the same room and seeking familiar elements and shapes.

The game’s developers hope that, in addition to imbuing gamers with a better understanding of Alzheimer’s, Room 301, Building 6, will have a broader emotional impact on the public.

“This story simulates just one out of millions of patients in the world, but if there is even one small facet of the game that evokes memories or feelings for our players, we’ll have achieved our goal,” Huang added.

On Monday, Tencent held its annual gaming conference Spark 2022, introducing 44 new gaming-related titles and projects. The event provides a useful outlook on gaming industry trends and the world-leading gaming company’s future plans.

Tencent is expanding its existing advantage in popular titles and mobile games while developing more expensive blockbuster projects and exploring new technologies. 

As the largest gaming company in China and the second-largest in the world after Microsoft by market cap, Tencent’s domestic gaming business is plateauing while its overseas gaming business continues to grow. 

Tencent’s financial results for the first quarter this year showed the firm’s game revenue in China decreased by 1% to RMB 33 billion ($4.9 billion) compared to the same period last year. In comparison, its international game revenue saw a 4% year-on-year growth to RMB 10.6 billion. Tencent attributed the results to an increase in revenues from games including Valorant and Clash of Clans, partly offsetting a decrease in revenues from PUBG Mobile as user spending normalized in the post-Covid period.

These factors are also influencing Tencent’s current thinking, as Spark demonstrated. Here are four major strategies in gaming that Tencent appears to be pursuing: 

Bringing proven gaming titles to mobile

• Tencent has partnered with firms like Microsoft (in Chinese) that own popular gaming titles or series IP, repurposing existing titles for phones and tablets. 
• The company brought the Microsoft Xbox title Age of Empires, a real-time strategy game, to mobile platforms for public testing in June (in Chinese). The firm has also revealed a plan to work with 20th Century Studios to develop a mobile game based on the sci-fi movie Avatar. At Spark 2022, Tencent also announced further expansions to its existing League of Legends universe, including a new esports-themed title, having previously launched three titles related to this game on mobile platforms.
• Tencent is experienced in operating mobile game titles, with stand-out successes such as Honor of Kings and PUBG Mobile in their gaming portfolio, so this move makes a lot of sense for the company. Additionally, the global mobile gaming market made up over half of the overall total gaming market in 2021, according to gaming insight firm Newzoo. 

Ambitions in AAA games

• One of the most notable titles revealed at Spark was the still-in-development open-world game Code: To Jin Yong, produced by Tencent’s LightSpeed Studios. This appears to be a move to marry a hugely popular yet largely untapped (in gaming terms) trove of material from one of China’s most famous authors with Tencent’s gaming capabilities. 
• Since last year, Tencent has sped up attempts to establish an AAA game development studio (in Chinese), TiMi F1. At Spark 2022, Tencent also announced that it would operate Ubisoft’s AAA-level title Tom Clancy’s The Division 2. 
• However, China’s gaming approval body the National Press and Publication Administration (NPPA) rarely approves overseas AAA-level titles, with the organization having failed to issue any new gaming licenses for overseas titles for over a year (in Chinese). Developing its own AAA title may allow Tencent to bypass such uncertainty.

Taking gaming tech into other fields

• Spark saw Tencent announce several projects where it will use its gaming prowess in new fields, ranging from scientific research to cultural heritage to tourism. 
• One notable example was the company’s confirmation that it will join a program initiated by the Institute of High Energy Physics at the Chinese Academy of Sciences, to power satellites to explore outer space using the firm’s gaming algorithms. 

Building universes around its most popular titles 

• At Spark 2022, Tencent revealed a series of programs and new add-in gameplay options to some of its biggest operating titles, including Honor of Kings, League of Legends, and The Magic Sword.
• For League of Legends, Tencent has a routine to add new characters and renew the gameplays. Generally, there will be a new “champion” every one or two months, and the gameplay strategies will have a significant change twice a year. Similar moves are also adopted in titles like the Honor of Kings and the mobile version of League of Legends. 
• Additionally, Tencent will release cross-game events based on games’ background stories for promotion, drawing players’ attention and building a stronger connection between its titles. For example, Tencent introduced the Arcane program in late 2021 after bringing League of Legends: Wild Rift to the domestic market. Players from the desktop must download the firm’s other related titles and have a try to earn awards. Tencent even partnered with Netflix to release a TV series with the same name to promote.

Chinese gaming giant Tencent announced on Monday that it is working on an ambitious new AAA-level title based on the work of Chinese wuxia martial arts literature titan, Jin Yong, during its annual game release event.

Why it matters: The news that Tencent will attempt to adapt Jin Yong’s work as a video game shows the firm’s ambition to create popular AAA titles with original work. A legendary writer, Jin Yong (also known as Louis Cha) and his vast literary creation in martial arts fantasies have often been compared to J.R.R Tolkien and The Lord of the Rings. Jin was one of the world’s bestselling authors and is hugely popular in the Chinese-speaking world.

• Tencent’s LightSpeed Studios will oversee the development of Code: To Jin Yong. The studio was behind the development of the successful global hit, PUBG Mobile.

Details: Code: To Jin Yong is the first video game adaptation of the works of Chinese wuxia writer Jin Yong. The video game is authorized by Ming Ho Publications, which owns the rights to Jin Yong’s work, and will be based on popular stories like The Legend of the Condor Heroes.

• Code: To Jin Yong will be an open-world game in which players will explore a China set in ancient times, with popular martial arts characters featured in Jin Yong’s books, such as Yang Guo and Qiao Feng. 
• The title is powered by Unreal Engine 5, a highly-rated game engine that offers good render quality and will enable developers to recreate intricate martial arts movements. Tencent released a trailer demonstrating a fight scene with various visual effects and swordplay powered by Unreal Engine 5.
• To build the immersive gameplay, the game studio recreated a digitized Mountain Hua, an attraction in real life known for its challenging hikes and a major game setting. The studio used a technology called photogrammetry to scan pictures and real-life scenes of the mountain.
• Tencent said in the release event that the title will be available worldwide “in the near future.”

Context: The game may compete with Black Myth: Wukong, another promising upcoming new title based on ancient Chinese myths and characters and developed by Chinese game firm Game Science. The story is based on Sun Wukong (or The Monkey King), the protagonist in the Chinese classical novel Journey to the West.

• Jin Yong’s novels present Chinese game developers an opportunity to create a video game universe that incorporates hundreds of popular fictional martial arts characters into serial projects. Previously, Chinese animators and movie makers have been bringing Chinese mythological stories to life in a sprawling universe, with the likes of Sun Wukong, Nezha, and others, with mixed results.

Major Chinese gaming companies Tencent and NetEase partnered with Microsoft’s gaming department to bring some of their games to Microsoft’s gaming subscription service Xbox Game Pass, which Microsoft announced at a Monday showcase event.

Why it matters: Chinese developers like Tencent and NetEase are facing an economic slowdown and a tightened regulatory environment in their home market. The partnerships with Microsoft, home to dominant global gaming platforms and a vast userbase, can broaden the appeals of Chinese-developed games and Xbox’s service.

• The partnership is a good opportunity for NetEase to launch its PUBG-like title Naraka: Bladepoint on a console platform, a format that is vital in the overseas markets.
• Microsoft will be able to give players access to popular titles from Tencent and NetEase, making Microsoft’s Xbox Game Pass a more attractive investment for gamers.

Details: The partnerships will bring titles from Tencent’s US-based developer Riot Games and NetEase’s trending PUBG-like title Naraka: Bladepoint to Microsoft’s gaming subscription service, Xbox Game Pass.

• Each of Riot Games’ five titles, League of Legends, Wild Rift, Legends of Runeterra, Valorant, and TeamFight Tactics, will be available through the subscription service. For instance, subscribers can now unlock all characters in League of Legends and Wild Rift for free. Some other bonus paid content will be free for subscribers later this year. 
• NetEase’s Naraka: Bladepoint, which has already sold 10 million copies (in Chinese) globally on desktop platforms, will be free to Xbox Game Pass subscribers. The title will premiere on Xbox on June 23 before any other console platform. NetEase plans to launch the game on Xbox rival PlayStation at a later date.

Context: Microsoft is making a push to promote its game pass subscription service, in a similar way to the likes of Spotify and Netflix, with users paying a flat monthly fee for access to a gaming library.

• Launched in 2017, Xbox Game Pass had over 25 million subscribers this year, as Microsoft revealed in a January 18 press release.
• Most AAA-level game titles cost around$39 to $49. Xbox Game Pass offers a variety of games for a monthly subscription fee of $9.99, which is significantly different from the traditional games’ buy-to-play business model.
• Apple and Sony have also launched their subscription services, Apple Arcade in 2019 and PlayStation Plus this year.

Chinese regulators released a list of 60 newly approved domestic titles (in Chinese) on Tuesday after another approval pause in May, including titles from notable gaming firms like HoYoverse (formerly known as miHoYo) and Perfect World. In April, the regulators resumed approving new games for the first time in eight months. 

Why it matters: China’s National Press and Publication Administration (NPPA) usually releases a list of approved gaming titles monthly. With no games approved for May, gaming firms seeking to bring new titles online continue to face uncertainty. 

Details: The NPPA, China’s government department for publishing news, films, and games,  gave licenses to 60 new games in June.

• 58 of the 60 listed titles are for mobile platforms (including tablets). The other two are a web game and a client game targeted mainly at desktop users. In comparison, 40 of the 45 approved titles in April were made for mobile platforms.
• The list also didn’t include any titles for console platforms like Xbox, Playstation, and the Nintendo Switch.
• A new title from HoYoverse, developer of the globally popular game Genshin Impact, was approved for June. In addition, Perfect World, the operator of Dota 2 on the Chinese mainland, received a license for an Otome game, a story-based game targeted at women.
• Of the titles approved, 16 are designated as being in the “beta” phase, indicating that a new policy issued last August that allows local governments to approve games in the beta phase has come into effect.

Context: The NPPA’s eight-month halt on the issuance of new gaming licenses had major ramifications for the gaming industry in China, causing a sharp decline in the growth rate of the industry, as well as the downsizing of major players in China’s gaming sector.

• As a result of this uncertainty and stricter policies around teenage gamers in China, gaming companies like Tencent and NetEase began more aggressive expansion overseas as their local business slowed.
• There are still no signs of relief for overseas titles in China to get approvals; the last batch to be licensed was June 2021.

Chinese game streaming platforms Huya and Douyu have begun slashing headcounts as China’s mass tech layoff continues, Chinese media outlet Tech Planet reported Friday.

Why it matters: The pair joined China’s large-scale layoffs among tech companies as the country tightens restrictions on the game livestreaming industry.

• Layoffs at Huya and Douyu are another blow for Chinese gaming giant Tencent, a major shareholder in both of the companies. The Chinese State Administration of Market Regulation (SAMR) blocked a merger deal between Huya and Douyu in July 2021 to avoid “further strengthening Tencent’s dominance in the game streaming market.”
• In mid-April, China resumed issuing gaming licenses to Chinese game makers after an eight-month freeze. But the regulator has yet to resume issuing licenses to overseas games. 

READ MORE: INSIGHTS | Chinese tech giants are still slashing headcounts

Details: Huya’s layoff mainly affects its international business department, which has more than 200 employees, or around 10% of the company’s total headcount, according to the report. The company is planning a 70% cut in its international arm, while its domestic business will also face a 20% layoff. Douyu is reportedly planning for a 30% layoff, targeting teams for gaming business development and livestream agent services.

• The international teams at both of the companies will bear the brunt of the layoffs as they operate in a new business area that demands more investment, the report cites an unnamed employee of Huya as saying.  
• Douyu said the layoffs are just part of their “normal human resources optimization,” according to the report.
• Regulatory headwinds and decreasing user bases led to weak financial performances for the two companies during 2021. Huya recorded a net loss of RMB 312.7 million ($49.1 million) for the fourth quarter of 2021 after consistently posting profits since its IPO in 2018. Douyu posted a net loss of RMB 193.2 million for the same period.

Context: Huya and Douyu account for a combined 70% of China’s game livestreaming market, the SAMR said in July 2021. Huya owns a 40% market share and Douyu 30%.

• Earlier this month, Tencent said it will shutter its game streaming platform Egame by June due to a “change in business strategies.”
• China’s gaming industry has felt the layoff chills since the beginning of this year, with many of the key players trimming their headcounts.

When explaining what “the metaverse” might look like, many Chinese investors and tech entrepreneurs refer to the Oasis — a fictional virtual world where people “can do anything, go anywhere” after donning a virtual reality headset: like, “surf a 50-foot monster wave in Hawaii, ski down the Pyramids, or climb Mount Everest with Batman,” as depicted by the protagonist Wade Watts in the 2018 science fiction movie “Ready Player One.”

A combination of “meta” (a prefix from Greek for “after” or “beyond”) and “universe,” the term metaverse was originated by US science fiction writer Neal Stephenson in 1992. It was a niche term favored by techies and gamers to illustrate the next iteration of the internet, an immersive, sensory 3D online experience. But in 2021, “metaverse” may have become the buzzword of the year, much thanks to tech companies like Roblox and Facebook (now Meta), as they paint a future in which people play games, shop, exercise, work, learn, and do other things in various virtual spaces. 

The concept caught on in China this year as well, with companies quick to invest in the metaverse. But the Chinese market has its own set of tech giants, internet culture, and regulatory norms. TechNode talked to several investors and tech companies in the metaverse-related fields, hoping to provide some clues on how China reacts to the popular concept.

A few takeaways: Chinese venture capitalists (VCs) have for years been investing in technologies central to the metaverse, making the country well-prepared for developing its own leaders in the space. The VCs agree that technologies that serve to build the infrastructure of the metaverse are probably the smartest investments since it’s too early to tell which app or companies will dominate. 

Moreover, China may become the first place in the world to have a full metaverse experience. The Chinese government is watching the phenomenon closely and talking to companies to learn more about the metaverse, Chinese tech executives told TechNode. 

How did the metaverse concept become popular in China?

In March, US gaming platform Roblox went public in New York, quickly hitting a $38 billion market cap. In its prospectus, Roblox said, “some refer to our category as the metaverse, a term often used to describe the concept of persistent, shared, 3D virtual spaces in a virtual universe.” 

Roblox’s successful IPO debut popularized the metaverse, and over the ensuing months, it became a buzzword in the US. At the same time, some communities in China started similar discussions but kept most within the investing, tech, and gaming circles.

Metaverse entered into the Chinese mainstream conversation in August when TikTok’s owner ByteDance acquired Chinese virtual reality (VR) gear maker Pico for a reported RMB 5 billion ($783.6 million) (in Chinese). Pico accounts for 33.6% of the market in the second quarter of 2021, according to IDC’s Augmented and Virtual Reality Headset Tracker.

In the first 10 days following the ByteDance acquisition news, searches and interest in the metaverse surged on the Chinese internet. On superapp WeChat, the popularity of “metaverse,” based on published articles and videos, rose 13-fold, according to WeChat’s trend index. Searches of the term rose 19 times on top search engine Baidu, Baidu Index showed. 

Aside from ByteDance, other Chinese tech giants like Tencent, Alibaba, and Baidu have shown interest in metaverse-related projects. 

“We felt that we have a lot of tech and capability building blocks that will allow us to approach the metaverse opportunity” through multiple pathways, Tencent Chairman and CEO Pony Ma said in the company’s third-quarter earnings call on Nov. 10. Specifically, metaverse can be an opportunity to add growth in gaming, social networking, and business applications, Ma said in the call.

Alibaba Cloud, a subsidiary of the e-commerce giant, announced a “metaverse” solution in November. An Alibaba spokesperson said the solution integrated many of the company’s proven technologies to provide support for metaverse-related applications. The solution includes services such as remote rendering, blockchain as a service, and data analytics.

Baidu Vice President Ma Jie said at a Nov. 2 Baidu AI event (in Chinese) that the company plans to lower the production cost for content creation in the metaverse by developing VR content platforms and VR interactive platforms, leveraging the company’s AI technologies. “Baidu would love to work with customers, developers, and users to create a multi-person interactive world of the metaverse and develop new applications,” Ma said.

What do Chinese investors and tech leaders think of the metaverse concept?

The following four interviews have been edited for clarity and brevity. Quotes from Feng Zheng of Shunwei Capital, Yang Ge of Sky Saga Capital, and the two co-founders of Reworld were translated from Chinese:

1. Chinese investors have invested in tech that would be useful to the metaverse for years

Feng Zheng, vice president of Shunwei Capital

Note: Shunwei Capital is a Beijing-based venture capital fund that focuses on the tech sector. It has been investing in technologies that would be useful in the metaverse for years. 

“Metaverse is a very distant concept,” Feng said. “I think it’s a vague conceptual term, leading many people to come up with different interpretations. Shunwei doesn’t have a metaverse-specific investment bracket. We have just been investing in things in the virtual direction because we were following the natural evolution of technologies.”

For example, in 2014, Shunwei invested in Agora, a company that allows other applications to embed real-time audio and video communications. The company provides tech backend for the live audio platform Clubhouse. In 2017, Shunwei led in pre-Series A of Style3D, a virtual apparel design platform, providing clothing companies with 3D clothing and virtual fashion concepts. In 2018, Shunwei invested in Kujiale, a 3D interior design platform, providing 3D design templates for home construction and renovation companies. Last year, Shunwei exclusively invested in the pre-Series A of Next Generation, a startup focusing on creating AI-generated virtual humans and virtual idols. 

Feng said Shunwei “has been seeing brand new opportunities and trends in the past couple of years, thanks to gradual tech advancements in AI, 3D rendering, video, audio, computing power, and the next-generation 5G network. The improvements are like new Lego bricks. With these new bricks, we can create and build things that weren’t possible just a few years ago. Internally, we call the space ‘the virtual world sector.’ We are investing in companies that provide 3D infrastructure, such as virtual humans, which we believe will be the core of communications in the virtual world. 

“I think virtual humans might be the apps in the virtual world. For example, a fitness app in the virtual world won’t be what it is today. We may have a cool-looking avatar guiding us and interacting with us. Most Chinese firms’ investment logic will be similar: starting from infrastructure and then looking for applications that can be implemented today. Shunwei might invest a bit more on the applications front, such as 2D, 3D applications. But we aren’t looking for an all-encompassing app that will dominate a large part of the virtual world. It’s too early for that kind of app, and no one can imagine what that will be like.”

2. ‘We prefer to invest in the infrastructure of the metaverse’

Yang Ge, co-founder of Sky Saga Capital (SSC)

Note: Yang said SSC, a Beijing-based venture capital firm focusing on smart manufacturing, internet tech, and AI, chose to invest in companies that provide the infrastructure to the metaverse, such as AI and virtual human-related companies. 

“We prefer to invest in companies that are building underlying tech infrastructure and the environment of the metaverse,” Yang said. For example, in 2018, SSC invested in the seed round of a company called Rct AI, which provides AI solutions and AI-generated content. In 2019 SSC invested in Xianyi Numa, a company that specializes in providing facial expressions to computer-generated virtual humans. It also helps design storylines for these virtual humans.

Yang said “the metaverse will require a large number of environments to be built and a large amount of content. So this year, a very important term is ‘AIGC,’ meaning content generated by artificial intelligence. The crucial thing in the metaverse is to use AI engines to create various types of content and form a communication environment, which serves as the base layer of the space. You can think of AIGC as the infrastructure of the metaverse.

“The next generation of internet giants will be different from the current ones. But most differences will lie on the surface level, on the presentations. The company structures and fundamentals will stay the same, such as their operational management, maintenance, and internal concept of the community. People’s needs will remain the same. They will still need to make friends, communicate and commerce online. But all those actions will look in a very different form than what we have now.”

3. China might be the first place where people get to have a full metaverse experience

Alvin Wang Graylin, China president of HTC. 

Note: Taiwanese electronics maker HTC runs a virtual reality (VR) brand called HTC Vive, offering mid to high-end VR headsets, VR hardware, and open app stores for VR games and applications. In the high-end VR headset market in China, HTC accounted for 70% of the market share in the third quarter, according to data shared by GfK, a market research firm based in Germany. A high-end VR headset usually costs more than RMB 5,000 ($784). 

“Metaverse is not something where you go from zero to one. I was on the internet yesterday. Tomorrow, I’m in the metaverse. No, it’s not going to happen like that. It’s going to develop over the next five to ten years. I think within the next few years, we will see pieces of this becoming more mature…It will for sure happen within 10 years, and a lot of it will happen within five years. 

“I don’t know if in China it makes sense to copy the Western models (i.e., Facebook, Roblox). Maybe when the internet started, that’s how we developed some of the initial internet applications or mobile applications. But I feel like in some ways, China may be ahead and may have different models to develop and progress the industry faster. One of the things that’s a little bit different in China versus the rest of the world is that in China, the government supports the virtualization and digitization of its economy and encourages various industries to adopt more advanced ways to utilize new technologies. Whereas you look at the rest of the world, private businesses are left on their own trying to create that.

“It’s difficult to get 1,000 companies and 200 countries to agree. But, if you get one country that is much more centrally managed, I think it’s easier for the government to say, okay, you will use the Chinese digital currency and they will work across all of these worlds, or you will use the resident identity card as your key ID system, but we will let you change your avatar, right? I mean, this is an example. It’s more so the fact that the country can say that and then all the companies in the country will have to follow. So, you may have the first full metaverse experience happen in China.”

4. The Chinese government is paying close attention to the metaverse 

Yao Guangshi, CEO and co-founder of Reworld, and Dong Yupeng, co-founder of Reworld. 

Note: Founded in 2018 in Beijing, Reworld offers a platform for users to play, and design their own 3D games and other content. Reworld experiences are often compared to those on the US gaming platform Roblox. In April, Reworld raised RMB 100 million ($15.7 million) in a strategic round from ByteDance. Before the ByteDance investment, Reworld had raised $56.8 million in two rounds from lead investor Joy Capital. To compare, Roblox had raised $856.7 million in 10 rounds from 2005 to this year, before it went public this March. 

“Games often have a clear structure and model. They would incentivize players to chase the goal and reward players once they achieve the goal…But metaverse requires a greater degree of openness. It’s more like a social space. It will provide you with all kinds of scenes, and you have the freedom to choose which to interact with. Gaming would be one of many scenes to choose from. 

“In the future, apps in the metaverse may borrow some features from games. For example, if I build a 3D supermarket with tens of thousands of square meters. I may build different sections for electronics, produce, and others. I may also build some gamification scenes to incentivize people to buy, like giving you more enhanced details of the things you want to buy. But you won’t call the supermarket a game. 

“We recently attended a metaverse-related forum discussion organized by a Beijing municipal government agency of economic and informatization. They were very enthusiastic about the trend and had a few projects that wanted companies to take part in. They also see this as a new competition area in the tech and internet industry around the world. I can sense that the Chinese government is very quick to react to new tech trends like the metaverse. It’s probably a good thing for China.” 

Update: The article was updated to include four paragraphs about Chinese tech giants’ metaverse-related moves in the second section.

South African telecom company Naspers said in a statement Wednesday that its tech arm had sold up to 2% of Chinese internet giant Tencent for $14.7 billion, cutting its stake in China’s most valuable tech firm to 28.9%.

Why it matters: Naspers’s block sale repeats a March 2018 trade in which Tencent’s biggest shareholder sold 2% of the world’s largest gaming company for $9.8 billion. Tencent’s stock fell by nearly 50% over the following six months.

Details: Prosus, the Dutch-listed international arm of Naspers that holds Tencent shares, said Wednesday that it had sold 191.89 million Tencent shares for HKD 114.1 billion (around $14.7 billion), reducing its stake to 28.9%.

• Prosus remains Tencent’s largest shareholder.
• Those shares were sold at the price of HKD 595 each, slightly lower than Tencent’s Wednesday close price of HKD 629.5. 
• Tencent shares dropped by more than 2% on Wednesday morning following the announcement.
• Prosus said cash from the sale will “increase its financial flexibility to invest in growth.” The trade is “understood and supported by Tencent”, said Prosus.
• The firm also promised not to sell more of the company’s shares for three years.

Context: Tencent said last month that its profit for the fourth quarter of 2020 rose 175% year on year to RMB 59.3 billion (around $9.1 billion). The company’s revenue for the fourth quarter rose 26% year on year to RMB 133.67 billion.

• Shares of Tencent reached a historical high in January, but then started to fall as China began to tighten regulations on tech companies.

The owner of PlayerUnknown’s Battlegrounds (PUBG) has cut ties with Chinese tech giant Tencent in India after the country banned 118 Chinese apps, including international hit PUBG Mobile.

Why it matters: While most of the apps banned last week don’t have a huge user base in India, PUBG Mobile had more than 50 million players in India as of April 2019. PUBG Corporation, which develops and publishes the original PC/console game, is a South Korean company, but it partnered with Tencent to bring the game to mobile. The move to cut ties with Tencent is an attempt to lift the ban on the game.

Details: PUBG Corporation said in a statement Tuesday that it would no longer license the PUBG Mobile franchise to Tencent Games in India, CNBC reported.

• The company said it would take on all publishing responsibilities within India.
• “As the company explores ways to provide its own PUBG experience for India in the near future, it is committed to doing so by sustaining a localized and healthy gameplay environment for its fans,” said the PUBG Corporation.

Context: Last week’s ban followed a standoff between Indian and Chinese troops in the same week. In June, India banned 59 Chinese apps, including Bytedance’s Tiktok and Tencent’s Wechat, on national security concerns following a deadly border clash with China.

• PUBG Corporation is owned by South Korean video game studio Bluehole. In 2018, Tencent acquired a 10% stake in Bluehole, becoming its second-largest shareholder.

Everyone’s talking about Tiktok, the hot short video app that has been thrust into the global spotlight on the back of an emerging US-China cold war. But outside China, few people know about Bytedance, the elusive tech unicorn behind one of the world’s biggest social media smash hits.

The company has always been reclusive. When employees run into journalists, they joke about being seen with dangerous contacts. Zhang Yiming, the company founder and CEO, rarely speaks to media directly. The mystery surrounding the world’s most valuable tech startup spurred TechNode to take a deep dive into the company last year, the results of which we published monthly in the form of our first In Focus newsletter series. Many of these articles were written by Bailey Hu, who left TechNode in May 2019. We are offering up our research in this story, with some updates.

While most international users know Bytedance as the company behind Tiktok, it isn’t just the maker of a single successful platform. In fact, the company has a lineup of virally popular apps in China, its home market. These include news aggregator Jinri Toutiao; Douyin, the domestic version of Tiktok; and Xigua Video, another video-sharing platform. In overseas markets, it operated Vigo and Topbuzz, the international versions of Xigua Video and Jinri Toutiao, respectively, both of which Bytedance shut down because of poor performance.

These stumbles have done little to slow the Beijing-based company. It is considered the world’s most valuable tech startup, according to CB Insights. The company was valued at as much as $140 billion earlier this year when state-owned carrier China Mobile, one of its shareholders, sold a small stake in a private deal, according to Reuters.

Here are eight things to know about Bytedance:

1. It’s huge

In March, Bytedance founder Zhang Yiming revealed in an internal letter to employees that the company’s global headcount had exceeded 60,000, and the number is expected to reach 100,000 this year.

Ad sales and content monitoring staff each make up a quarter of Bytedance’s workforce, according to a report by The Information in April 2019.

Bytedance now employs more people than Facebook, analyst Liu Jiehao of research group Iimedia pointed out, but average productivity still lags well behind the US titan. Facebook booked $71 billion in earnings in 2019, while Bytedance reportedly made $17 billion in revenue in the same period.

Tencent, which employed 54,000 people as of December 2018, fell between the two in terms of 2019 revenue. The company reported a total annual revenue of RMB 377 billion (around $48.5 billion) in 2019.

2. It’s all about an algorithm

Providing online news and content for millions of users in China, Bytedance’s flagship app Jinri Toutiao (which translates into “Today’s Headlines”) doesn’t require an editor-in-chief to lead its content strategy like other news platforms do, according to company founder and CEO Zhang Yiming.

The app’s editorial staff is a set of artificial intelligence and deep-learning algorithms that deliver personalized content to its users.

Like other flagship Bytedance apps, Jinri Toutiao shows users an endless feed of posts and videos recommended by its algorithms, all based on the user’s age, sex, location, and personal preferences.

As you read posts recommended by the platform, it learns what you like and don’t like by tracking your behavior: what you click to read, what you choose to dismiss, how long you spend on an article, which stories you comment on, and which stories you choose to share. The behavior recorded by the system then spits out recommendations to populate your feed. The more time you spend in the app, the more it learns about you—and the more it learns about you, the more time it can get you to spend in the app.

The company has replicated the recommendation system with other products such as Douyin and Tiktok. Its success speaks for itself.

According to a person who is familiar with Bytedance’s recommendation system, it was initially based on Google’s Wide & Deep Learning, open-source models that combine the strengths of the wide linear model and the deep neural network, two types of artificial neural networks that can perform tasks usually carried out by a human brain.

The Wide & Deep Learning system is used for recommendations on Google Play, the search engine’s popular Android mobile app store with more than 1 billion active users, and has led to “significant improvement” in app downloads, according to a paper by a group of Google researchers.

“The recommendation system is now Bytedance’s core technology that underpins everything from its news app to its short-video apps,” said the source.

In January 2018, Bytedance held a meeting to disclose how the algorithms work. The move was in response to pressure from internet watchdogs and state media, which had criticized the Jinri Toutiao app for spreading pornography and allowing machines to make content decisions (in Chinese).

At the meeting, Bytedance’s algorithm architect Cao Huanhuan explained the principles of the recommendation system used by Jinri Toutiao and many of the company’s other apps. The full text of his speech can be found here (in Chinese).

The company has moved to open up access to its recommendation algorithm to external companies in recent years after the success of Douyin and Jinri Toutiao. In September, Bytedance started to package its recommendation algorithm as a solution, known as Byteair, to its different lines of products and external partners.

3. It runs a lot of apps besides Tiktok

On its English-language website, Bytedance lists a modest ecosystem seven apps worldwide. The reality is more like a jungle, populated with hybrids, close cousins, and the occasional evolutionary dead end.

Tiktok and Douyin are the international and Chinese versions, respectively, of Bytedance’s hottest app. They don’t share any content, their features vary, and each app has different privacy policies in accordance with local regulations. Huoshan and the now-shuttered Vigo, similarly, had been the global and domestic versions of another short-video offering.

Many of Bytedance’s apps are free, and most have options for in-app purchases on Apple’s China App Store. In addition to those listed, relatively new launches like Tomato Novel are not only entirely free to use, but also offer cash incentives in return for user activity, as TechNode previously reported.

4. Tiktok vs. Douyin—the same, but different

Douyin and Tiktok are unquestionably Bytedance’s biggest successes. The two apps are often referred to as versions of one another—Douyin is the domestic Chinese version; Tiktok is the global version.

Bytedance once presented Tiktok and Douyin as two versions of the same product, at least until Tiktok began attracting scrutiny overseas because of its Chinese ties. The two apps share the same logo, layout, and even some stickers and filters, but they are strictly segregated in accounts and content. This means it’s impossible for a Tiktok user to log in to the Douyin app using their Tiktok credentials, and vice versa.

Now, Bytedance is trying hard to shake off Tiktok’s ties to China. It named an American CEO in May and reportedly cut off Chinese employee access to Tiktok in June. But the efforts didn’t pay off. India banned the app in June after a border clash with China in the same month and Japan is seeking to restrict Chinese-made apps including Tiktok. This month, the Trump administration signed an executive order that would effectively ban the app in the US on Sept. 15.

Content recommendations are not always entirely dependent on algorithms, at least in regards to the Douyin app. Douyin has promoted a fair amount of content produced by state-run media and government agencies for propaganda purposes. This content features recent news or stories with “positive energy,” a phrase that describes topics that align with government policies.

Conversely, on the Tiktok platform, recommended content featuring news or politics is minimal. Everything in the app is designed to be fun. A commentary published in The New York Times said that Tiktok might be “the only truly pleasant social network in existence.”

Bytedance’s account segregation of Tiktok and Douyin differs from the way that tech titan Tencent has constructed the domestic and international versions of its mega messaging app Weixin (known as Wechat abroad). 

By comparison, Tiktok and Douyin users exist in different worlds, meaning that content cannot be accessed across platforms. For example, one of Tiktok’s most popular accounts is Jacob Sartorius, an American singer who has 20.9 million followers on the platform. However, the “Jacob Sartorius” found on Douyin is an “unofficial” account with 36 followers.

Under pressure from authorities, Bytedance has completely segregated the Tiktok and Douyin platforms, freeing the company from any potential breach of China’s internet controls while providing its international users with a relatively censorship-free platform.

5. It’s also an experienced VC investor

Bytedance was founded in 2013, but it started to make investments as early as 2014. It kicked off its VC activity by investing in a series of blogs and media companies such as artificial intelligence-focused blog Xinzhiyuan, and Caixin Globus, an international news site founded by Chinese finance news outlet Caixin.

Bytedance started to expand its investment portfolio outside of China in 2017 as overseas markets became more and more important to the company, but it tended to make acquisitions rather than simply investing.

By far the most successful example of Bytedance’s global expansion was its acquisition of lip-syncing app Musical.ly in 2017, which was later rebranded to Tiktok and became a global hit.

In recent years, Bytedance pivoted to invest in enterprise services and online education companies such as edtech company Fclassroom in 2019 and online word processor Shimo in 2018. In April, Bytedance co-led a Series B of nearly $14 million into Chinese cleaning robot maker Narwal Robotics.

Based on disclosed figures, Bytedance tends to favor certain tech sectors over others.

Here are some of Bytedance’s biggest investment deals from 2015 to 2019.

6. Bytedance has got big plans for gaming

In June 2018, we reported that longstanding Bytedance app Jinri Toutiao had launched “Jinri Games,” its own version of Wechat mini games, or lightweight apps which run on a large platform without requiring users to leave the app.

Within Toutiao’s selection of in-app mini programs—another adaptation of a Wechat innovation—Android users could for the first time choose from a variety of casual games.

Since then, mini games have become available in Bytedance’s humor app Pipixia and most recently, Douyin. The additions allow independent gamemakers to adapt or develop 10-megabyte programs for each platform.

In March, the Bytedance obtained its first mobile games license from Chinese regulators, allowing it to publish a game legally to China’s multi-billion-dollar gaming market. Bloomberg reported in January that the company is also building a gaming division that will hire more than 1,000 employees, and there were already two games in the pipeline. The company’s casual mobile game “Combat of Hero” became the most-downloaded free iOS title in Japan for four consecutive days beginning March 7, the South China Morning Post reported.

7. Edtech is a sector it just can’t quit

Bytedance may have made its name with short-video and news aggregator apps, but it seems unusually determined to break into the online education sector.

Over the past two years, the company has made several attempts to gain a foothold in online education through the launch of new apps, acquisitions, and investments. Underperforming apps are abandoned as new ones keep appearing, fresh off the production line.

• In March 2018, Bytedance acquired Open Language, an online English course provider.
• In May 2018, it launched Gogokid, a one-to-one tutoring platform for Chinese children to learn English online with foreign teachers.
• In July 2018, it launched Haohao Xuexi, a knowledge-sharing app that features content covering career advice, parenting, culture, and wealth management.
• In August 2018, Bytedance led a $49.5 million Series C funding round in San Francisco-based education technology company, Minerva Project.
• In December 2018, it launched AiKID, a foreign teacher live-streaming platform.
• Bytedance licensed some patents in January 2019 from now-defunct smartphone maker Smartisan, which the company indicated was to expand and develop its online education business.
• In May 2019, it launched a K-12 online education platform Dali Ketang, which offers courses from primary school to high school. Chinese tech news outlet 36Kr reported that Bytedance acquired another online teaching platform named Qingbei Wangxiao to help with the development of Dali Ketang.
• In July 2019, it was reported that Bytedance was testing a short-video-based English-learning app named “Tangyuan English.”

Bytedance’s education apps:

8. If it loses Tiktok, it’ll still scare Tencent

In a lot of ways, Bytedance is something totally new. It’s the first Chinese tech company that’s really based on a new algorithm, and the first Chinese company ever to get a big hit in the global app space. It often terrifies its Chinese competitors as much as it seems to terrify American policy-makers.

If it’s forced to sell Tiktok, it could lose one of those strengths: the global hit. But it’ll remain a huge, disruptive force in Chinese tech.

Apple has frozen updates of mobile games that didn’t provide gaming licenses from Chinese regulators. The move came after a “loophole” used by foreign game makers to bypass China’s strict gaming regulations was closed by Apple at the end of June.

Details: The American tech giant said developers would not be able to update their games without a valid license issued by the Chinese government, Financial Times reported Thursday.

• Games will not be removed from Apple’s App Store, and the company will allow games to be downloaded, said the report.
• TechNode reported in February that Apple sent a notice to developers requiring them to submit valid license numbers for paid games or games offering in-app purchases before June 30 in order to distribute in mainland China. 
• In a notice sent to game makers that have titles listed on the Chinese App Store, Apple said: “Chinese law requires games to secure an approval number from the General Administration of Press and Publication of China.”

Context: The Chinese National Radio and Television Administration, China’s top content regulator, issued a notice in 2016 requiring mobile games to obtain approval before publishing.

• Apple previously required developers to submit a license number to upload games to the store, but a report by The Information suggested in 2018 that Apple didn’t actually check the license numbers.
• At the time of the report, developers were able to list unlicensed games by submitting a random number instead of an official license number.

Apple will start removing unlicensed games from its China app store as a deadline given by the American technology giant passes on June 30. The company’s move to enforce Chinese game licensing regulations is expect to affect thousands of mobile games that have relied on a loophole to list on the Chinese app store.

Why it matters: Apple’s move will make it much harder for international mobile games developers to access the Chinese market, requiring them to find a Chinese partner to apply for a license from regulators.

• Since 2016, Chinese regulations have required all paid games or games that offer in-app purchases to obtain a publication license before they can be uploaded to app stores.
• Apple required developers to submit a license number to upload games to the store, but a report by The Information suggests that Apple doesn’t actually check the license numbers.
• Developers were able to list unlicensed games by submitting a random number instead of an official license numbers.

Details: TechNode reported in February that Apple sent a notice to developers requiring them to submit valid license numbers for paid games or games offering in-app purchases before June 30 if they want to distribute in mainland China. 

• Apple is ready to take action next month as this deadline approaches, Bloomberg reported Tuesday, citing “people familiar with the matter.” Bloomberg reports that the company will start removing thousands of games from its App Store in China next month.
• “Chinese law requires games to secure an approval number from the General Administration of Press and Publication of China,” Apple said in the notice sent to developers in February.

Context: The Chinese National Radio and Television Administration, China’s top content regulator, issued a notice in 2016 requiring mobile games to obtain approval from the administration before publishing.

• Only Chinese companies can apply for licenses, meaning that international developers must find a domestic partner to apply.
• It can take months for game makers to have their titles approved. Titles are often rejected for indistinct reasons. Chinese media has identified (in Chinese) some possible grounds for rejection, including erotic content, gambling, or traditional Chinese characters.
• China froze mobile game approvals for nine months in 2018, causing the country’s gaming industry to record its slowest growth in at least a decade.

Shares of Chinese internet and gaming company Netease jumped 8.1% as they began trading in Hong Kong on Thursday. The company is one of a number of US-listed Chinese tech firms to pursue a second listing in Hong Kong.

Why it matters: The strong debut for Netease, China’s second-largest online gaming company after Tencent, is a good sign for companies that are looking at a dual listing.

• The Hangzhou-based company is the second Chinese tech company to complete a US-Hong Kong dual listing. It has been listed on the Nasdaq since 2000.
• E-commerce giant Alibaba began dual listing with a November 2019 Hong Kong IPO.

Details: Shares of Netease traded at HK$133 (around $17.2) shortly after the Hong Kong market opened at 9:30 am. 

• The company previously priced its shares at HK$123 each, seeking to raise around $2.6 billion.
• In a ceremony held in Hangzhou, Netease founder and CEO Ding Lei said the secondary listing in Hong Kong is a “fresh start” for the company, according to local media. The Hong Kong market has “a better understanding of Netease,“ Ding said.

Context: The Hong Kong dual-listing trend came as the Trump administration threatened to order US markets to delist Chinese firms. Nasdaq-listed JD.com, a Chinese e-commerce firm, is also seeking to trade its shares in Hong Kong starting on June 18.

• The US and China have a long-running dispute about oversight of US-listed Chinese firms. China’s government does not allow the US Public Company Accounting Oversight Board (PCAOB) to view audit records of Chinese companies.
• The US Senate in May overwhelmingly passed a bill that could ban securities of foreign companies from the US financial markets if the audit watchdog is unable to access their audit records for three consecutive years.
• In a filing to the Hong Kong bourse on Monday, JD.com said the US government’s efforts to increase regulatory access to audit information could cause the company to face uncertainties, including a delisting from the US markets.
• “We could be delisted if we are unable to cure the situation to meet the PCAOB inspection requirement in time,” the company said.

Tencent reported Wednesday better-than-expected revenue for the first quarter thanks to a surge in gaming incomes.

Why it matters: The Covid-19 outbreak gave a boost to the company’s gaming revenue as people turned to online entertainment while stuck at home.

By the numbers: The company booked RMB 108 billion (around $15.2 billion) in total revenue in the quarter ended March 31, an increase of 26% compared with the same period of time last year, the company said Wednesday.

• Revenue from Tencent’s gaming business rose 31% to RMB 37.3 billion in the quarter, which the company attributed to a surge of daily active users (DAUs) of its flagship games PlayerUnknown’s Battlegrounds Mobile (branded as Peace Elite in China) and Honor of Kings during China’s stay-at-home period in February and March.
• The company’s ad revenue grew 32% year on year in the March quarter to reach RMB 17.7 billion despite a broader slowdown in China’s ad market.
• The company said its revenue from media ads fell 10% from a year ago due to “weak macro-economic conditions and suspension of sports events.”
• Tencent’s fintech and business services segment, which includes products such as Wechat Pay, consumer loan services, and cloud computing, grew to RMB 26.5 billion in the quarter, up 22% from the same quarter a year ago, but decreased 12% from the previous quarter.
• Monthly active users of Wechat, Tencent’s popular instant messaging app, reach 1.2 billion as of the end of March, up 8.2% from a year ago.

Headwinds: However, Tencent has also warned the upsurge could be temporary.

“We expect in-game consumption activities to largely normalize as people return to work, and we see some headwinds for the online advertising industry.”

Context: Shares of Hong Kong-listed Tencent have climbed by 14.4% since the beginning of this year, compared to a 15% decline in the Hong Kong exchange’s Hang Seng index.

• The company is also facing fierce competition from rising star Bytedance. The TikTok-owner is continuing to take ad revenue share from Tencent and has recently made a foray into Tencent’s home turf, the mobile gaming market.

Taobao has taken down physical copies of Japanese game maker Nintendo’s widely popular video game Animal Crossing from its marketplace.

Why it matters: The game, running on Nintendo’s Switch video game console, has taken the world by storm after the release of its latest in a series, New Horizons, last month—while a global pandemic has forced the world to find entertainment at home.

• While the Switch game console became officially available in China in December with the help of Chinese online gaming giant Tencent, the popular Animal Crossing series is not available on the console in the country, largely due to China’s strict gaming license policy.
• Players have turned to e-commerce platforms such as Alibaba’s online marketplace Taobao and second-hand trading platform Xianyu for retail versions of the game imported from overseas. A report by Pingwest on Thursday said that a physical copy of Animal Crossing: New Horizon was priced at RMB 600 (around $85.3) on Taobao, 40% more expensive than its official tag of $59.99.

Details: A Taobao seller of the physical copies of Animal Crossing confirmed to TechNode Friday that Taobao has taken down the items for “violating the site’s rules,” but the platform didn’t give specific reasons. The seller prefers to remain anonymous due to the sensitivity of the topic.

• Searches on Taobao with keywords such as the Chinese translations of “Animal Crossing” or “Animal Crossing: New Horizons” yields no results relating to the game on Taobao, according to TechNode’s review.
• A Chinese game blogger wrote on social media Friday that an attempt made by a Xianyu user to post an item relating to the Animal Crossing game failed. Xianyu said the item is an article of “contraband,” according to a screenshot provided by the blogger.
• It is unknown why the game was taken down by e-commerce platforms in China, but usually, sales of physical foreign games online are ignored by regulators. A representative of Alibaba didn’t immediately reply to requests for comment on Friday.

Context: A few days before the removal of the game, Bloomberg reported that pro-democracy activists in Hong Kong have started to post anti-government posters on the island life simulation game. Users can visit other players’ virtual islands in the game using the Nintendo Network.

• Animal Crossing: New Horizons sold more than 2.6 million physical copies in its first 10 days on sale in Japan alone, according to sales figures by Japanese digital game magazine Famitsu.

• The game has also propelled Switch hardware sales to new heights, according to The Verge. Sales of the game console reached 392,000 in the week the game was released, the highest seven-day total ever for the Switch.

• In February, popular infection simulation game Plague Inc. was removed from Chinese app stores as the Covid-19 outbreak intensified in the country.

TikTok owner Bytedance was on Friday granted its first mobile game license from Chinese regulators, according to records from an official database.

Why it matters: The license, issued by the Chinese National Radio and Television Administration (CNRTA), allows Bytedance to earn revenue from mobile games.

• A regulation issued in 2016 requires gaming companies to obtain approval from CNRTA for each paid mobile game or game with in-app purchases before publishing to China’s multi-billion-dollar gaming market.
• After taking a large share of the social media and online advertising markets dominated by Tencent, Bytedance is now ready to compete with the established Chinese internet giant in the gaming sector.

Details: A Bytedance subsidiary was granted on Friday a game license for a mobile game named “Fighting Girl Run” (our translation), according to the NRTA’s license database (in Chinese).

• The game is currently not available on major mobile app stores including Apple’s App Store, Xiaomi’s Mi Store, or Huawei’s App Gallery, as of Tuesday afternoon.
• The license is the first game license that the company or its subsidiaries have been granted.

Context: Bytedance tapped the mobile game market with the release of its in-app mini-game feature on its short video app Douyin last year.

• Bloomberg reported in January that Bytedance is building a gaming division of more than 1,000 employees.
• The report also said Bytedance’s first two games were set to be released this spring in both Chinese and overseas markets.
• The company appointed Yan Shou, an executive overseeing Bytedance’s strategy and investment unit, to lead its gaming business.
• Last month, Apple asked game makers worldwide to submit their game license numbers if they want to monetize their products in China.

Chinese internet and gaming giant Netease said Thursday its revenue for the fourth quarter increased 9.2% year on year to $2.26 billion, beating analyst estimates.

Why it matters: Netease’s strategy of focusing on its gaming business by spinning off its other units has started to pay off.

• The Hangzhou-based company’s robust performance in recent months has sent its market cap to a $44.7 billion high, outpacing search engine Baidu in August and e-commerce platform Pinduoduo, and making it the fifth-largest publicly traded Chinese technology firm.
• CEO William Ding expressed optimism about the company’s gaming and online education businesses in the first quarter during the call with analysts. Ding said that the self-quarantine across much of China due to Covid-19 meant that more people were playing games, a addition boon during a normally favorable season due to the Spring Festival holiday.

Details: Net revenues for the fourth quarter increased 9.2% year on year to $2.26 billion, the company said in a statement on Thursday, beating analysts’ average estimate of $2.18 billion.

• Revenue growth, however, was significantly lower than the 36% annual growth seen in the same quarter a year earlier. 
• Gross profit in the quarter grew 9% year on year to $1.2 billion. The company said the increase is primarily driven by increased net revenues from its music-streaming service Netease Cloud Music.
• Net revenues from online gaming services, its largest source of revenue, were $1.7 billion, an increase of 5.3% year on year. The growth was primarily driven by increased revenue contribution from mobile games including “Life-After,” “Invincible,” and “Identity V,” the company said.
•  Mobile games accounted for 70.4% of net revenues from online games during the quarter, the company said.
• The company recorded $8.5 billion in revenue in the fiscal year 2019, 15.6% more than that of 2018.

“Our online game services net revenues continued to grow, propelled by the sustained and growing popularity of our existing titles, again demonstrating the longevity of our game franchises… We will continue to bring more masterpieces to both domestic and global players in 2020.”

— Willian Ding, founder and CEO of Netease, in the statement

Context: Netease narrowed its focus on its gaming and entertainment businesses last year by spinning off its e-commerce and online education units.

• Youdao, Netease’s online education unit, went public on the New York Stock Exchange in October, raising more than $100 million.
• The company sold cross-border e-commerce unit Kaola to Chinese e-commerce behemoth Alibaba in September for approximately $2 billion.

Apple is requiring game makers worldwide to submit their license numbers gained from a Chinese content regulator if they want to monetize their products in mainland China.

Why it matters: Apple is adhering more strictly to a Chinese government rule that requires all paid games or games that use in-app purchases to obtain a publication license before they can be uploaded to app stores.

• Foreign companies are not allowed to apply for the license. They have to partner with local companies to legally launch their paid games in China.

Details: Apple has sent a notice to developers requiring them to submit license numbers for paid games or games offering in-app purchases before Jun. 30 if they want to distribute in mainland China, according to a report from AppInChina, a mobile service company that helps foreign apps enter the country.

• “Chinese law requires games to secure an approval number from the General Administration of Press and Publication of China,” Apple said in the notice.
• This may be the first time Apple has directly required developers to submit license numbers and it seems like that the company is tightening implementation of the Chinese government’s regulations on paid games, Todd Kuhns, marketing manager at AppInChina, told TechNode.
• Foreign game makers were able to bypass the restrictions by submitting a random number. A report by The Information suggests that Apple doesn’t actually check the license numbers.
• The game approval number for Mini Metro, a mobile game developed by New Zealand game studio Dinosaur Polo Club that is sold on the Chinese App Store for RMB 25 (around $3.6), cannot be found on the Chinese National Radio and Television Administration’s (NRTA) license database.
• “I think [bypassing the review system has] been an open secret for a while now,” Kuhns said.
• It is unclear how games without the approval number will be treated after the Jun. 30 deadline. Apple did not immediately reply to inquiries sent by TechNode on Tuesday.

Context: The NRTA issued a notice in 2016 requiring mobile games to obtain approval from the administration before publishing.

• China froze mobile game approvals for nine months in 2018, causing the country’s gaming industry to record its slowest growth in at least a decade.

5G has the long-term potential to bring significant improvements to cloud gamers. But for now, 4G will continue to be sufficient for providing solid user experiences, said Paul Yang, technical lead at Tencent Cloud, during Emerge at TechCrunch Shenzhen 2019. The industry’s development is not dependent on the rapid mass-adoption of the next-generation communication network in China, he added.

While acknowledging that 5G will be a “plus,” he said that 4G was already enough. Tencent remains focused on delivering a “good” 4G-based experience for casual gamers, and even some pro-gamers.

The commercial rollout of 5G announced on Oct. 31 has been touted as a boon for cloud gaming, where games reside on company services and are streamed directly to devices.

Ultimately it means better graphics and less lag, an issue which can often frustrate gamers. 4G took three to four years to become mainstream, while 5G will likely be slower, said David Dai from research and brokerage firm Sanford C. Bernstein. 5G penetration in China is expected to reach 30% by the end of 2021 and 54% by the end of 2022, said Dai, citing his own company’s data. 4G penetration rates for China Mobile in the same time frame were 47% and 67%, respectively.

Cloud gaming connections tend to be stable as long as people stay still. Yang said that switching base stations means users could experience a jitter. But even when users are in taxis or riding the subway, he believes that 4G will be enough. “The strategy for cloud gaming is little to no buffer, so users will see a jitter scene and jump to the latest scene,” said Yang.

When asked whether AR and VR technologies could integrate with cloud gaming, Yang said that VR equipment currently was too clunky to create a seamless experience. Until more lightweight gear arrives, cloud gaming may see more integration with existing trends like live broadcasting. Fans currently watch their favorite gamers play solo, but cloud gaming could make it far easier for them to play alongside.

China debuting 5G service 2 months ahead of schedule

At TechCrunch Shenzhen, we will be having Emerge as a side stage to dive deep into emerging tech trends. Please follow us closely in this space as we roll out insights into these topics.

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Panel | Cloud gaming: Reshaping China’s video games market

Cloud gaming is a major potential disruptor of the video game industry in China, one of the world’s biggest gaming markets with nearly 700 million users. It eliminates the need for high-end hardware, particularly significant in China, where many players are limited by hardware requirements. These limitations apply primarily to AAA games or the graphically intense games that require “a lot of resources, a lot of time, a lot of money” including powerful and costly graphic cards and CPUs. Chinese gamers will typically play AAA games on the lowest graphic setting, significantly degrading the visual experience.

Cloud gaming lowers the high hardware barrier for entry in AAA gameplay. The game is played entirely in the cloud, allowing the server to do all the heavy lifting while the user only needs internet access and a basic computer.

In this panel, we will discuss the biggest challenges and upsides to the introduction of the cloud gaming model within China, including the current state of the internet, 5G rollout, and the dynamic shift that cloud gaming may bring to the gaming market in China.

The panelists:

Yu Yang Technical lead – Tencent cloud gaming Yang currently leads the construction of Tencent Cloud Gaming Platform, which integrates Tencent Cloud’s audio and video experience with its IaaS offerings for one-stop cloud game access and streaming solutions. He moved over to Tencent Cloud in 2016 to help build its live broadcasting system from scratch after joining the company in 2008 to head up QQ’s data link system, which supported access for hundreds of millions of users.

David Dai Senior Analyst at Sanford C. Bernstein David Dai is the Senior Analyst at Bernstein for Asia Internet. In this role, he covers the top internet companies including Alibaba, Tencent, JD, Meituan, etc. and has done deep fundamental research on the major trends of China internet, and how that should shape the future of these companies. Prior to joining Bernstein, David worked in software and IT services in a number of roles, including senior consultant at Avanade, a Microsoft/Accenture joint venture, where he advised companies on IT strategies and software architecture, and lead programmer at a software startup for over eight years. David holds a BA in computer engineering from the National University of Singapore, an MA in computer engineering from Nanyang Technological University, and an MBA with distinction from INSEAD. In 2018, David was named Rising Star on Institutional Investor’s All-America Research Team poll.

Panel | Mass customization: The next wave for retail and manufacturing

China is facing a rising trend of customer-to-manufacturer (C2M), a model that connects the manufacturers and consumers for the production of tailored products at lower prices. By applying AI-powered data analytics from consumers to manufacturing, online retailers, consumer brands and AI companies are jointly making mass customization possible in China.

Local companies do have reasons to embrace the revolution information technologies bring to the manufacturing industry. Last year, China experienced its slowest economic growth in nearly three decades, leading to a wave of local factory closure amid the slowing demand and shrinking investment.

Global consumer brands with great appeal in the past are also struggling to compete for the younger generation with their increasingly diversified needs in a competitive market, as the country is faced with an aging population and low birth rates. A more intelligent, cost-efficient, and self-learning manufacturing process is the key to future growth and success, and some changes already take place.

A number of industry players are riding the technology wave. Pinduoduo, a top player in the sector, has doubled down on the model last December to support around 1,000 Chinese original equipment manufacturers. Other e-commerce giants are also setting their eyes on the sector with each operating their own C2M units, such as NetEase’s YEATION, Taobao’s Xinxuan and JD Jingzao.

The panel discussion will look at the current state of the C2M platforms in China by answering these key questions:

1. What are the key factors of mass customization in your perspective? How the manufacturing process under the C2M model is different from the traditional process.
2. How was the C2M model developed in China over the past years? What challenges manufacturers face in transforming manufacturing bases and how they could address the problems?
3. Any good examples? What are the secrets of making success in C2M models? How to run C2M in the manufacturing process?
4. What challenges manufacturers face in transforming manufacturing bases and how they could address the problems?
5. To develop mass customization, what are the first steps for manufacturers? What are the costs and expected returns on investments?
6. China’s lower-tier cities have been widely recognized as the next growth market for everything. What are the preferences and patterns for these customers, and how manufacturers could seize opportunities with customized production?
7. Image and speech recognition are some of the earliest adoptions in advertising and public security. How could these technologies be adopted to shape a more flexible production and sales model?
8. How will a flexible production model transform the organization and the way we do our business? What is the value-added proposition for mass customization and what pressing needs could be met?

Victor Tseng VP of Corporate Development at Pinduoduo Victor is Vice President of Corporate Development with Pinduoduo since February of this year. He was previously Vice President of Corporate Affairs at Ctrip. Victor has accumulated over 12 years of working experience in the Chinese Internet sector, with experiences as CFO and investor relations head for various private and public Internet companies, including Baidu. He was also lead China Internet Analyst for Deutsche Bank in the early part of his career. Victor obtained his MBA degree from Tsinghua University and an undergraduate degree from the University of California Los Angeles (UCLA).

Dan Kong Senior Investment Director of North Summit Capital Dan has over 14 years of working experience in the technology and finance industry. Prior to joining North Summit Capital, he has been with Deloitte, NEC, and Microsoft. He also has entrepreneurial experience in both the US and China. He has a Ph.D. in computer engineering from the University of California, Santa Cruz.

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网易相册：停止新用户注册 5月8日停止运营 – TechWeb

What happened: Online gaming giant Netease announced on Thursday it will shutter its web album service on May 8. New user registration and prepaid service were shut down Wednesday, and premium users will be refunded. Netease did not specify reasons for the closure in the notice (in Chinese), but encouraged users to move onto its Tumblr-style blogging service, Lofter.

Why it’s important: The shutdown comes as Netease slashes nearly half of its workforce across several business units as the economy slows and following the government’s throttling of the online gaming industry last year. The company reported that its 2018 net income fell 42.5% year-on-year to RMB 6.1 billion (around $895 million). Netease was granted a license for only one game title in December when authorities resumed license approvals to a limited degree, following a nearly nine-month moratorium on granting licenses that began at the end of March 2018.

(Can’t see the player? Find us on iTunes!)

Early last year, the central government put a freeze on gaming approvals, shutting out many big titles from making money, including PUBG and Fortnite. However, in December, they reopened approvals only to find themselves with a 6-month backlog, leaving giants Tencent and Netease still unable to monetize their biggest hits.

Daniel Ahmad, analyst at Niko Partners, joins us again to talk gaming regulation in China, the role of mini games in the WeChat vs Douyin battle, and how Steam is faring in the Middle Kingdom.

Links

• Niko Partners
• China Tech Talk 18: China’s gaming and e-sports industry with Daniel Ahmad

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• Daniel Ahmad, @ZhuGEX

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• John Artman, @knowsnothing, TechNode
• Matthew Brennan, @MattyBGoooner, ChinaChannel

Producer

• Peter Isachenko

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• Music: “Theme from Penguins on Parade” by Lee Rosevere, Music for Podcasts 3

China has long been ambivalent about technological change, attempting to reap the rewards of innovation while also protecting existing traditional structures. In the 15th century, the treasure fleet commanded by the eunuch admiral Zheng He that brought riches and territorial expansion to the Yongle Emperor was destroyed, some historians theorize, after it threatened the Confucian hierarchy by allowing merchants to become very rich, very quickly. The first railroad in China, just outside Shanghai, was dismantled in 1877 because it threatened Confucian social order, not to mention the steamships used to navigate the canals surrounding Shanghai.

Nowadays, this ambivalence manifests itself as a strained relationship between the market forces of entertainment and an older generation wary of things they don’t understand. However, unlike in the past, China not only recognizes the importance of embracing change, but also the capability to shape how it impacts the broader culture, putting it on the path to become a gaming powerhouse.

In 2018, the country had an estimated 463 million mobile game players, according to a report by China’s Game Publishing Committee and Gamma Data. That’s almost 60% of all mobile phone users in China and 44% of all mobile game players worldwide, according to Statista data; around 33% of all Steam users come from China, based on calculations via publicly available figures about the platform’s user base. In 2019, data from Statista shows that the country is projected to lead the world in mobile game revenue, and just recently, the central government recognized gaming as an official profession.

However, since PC and console games first became popular, governments, teachers, and parents have warned that video games will not only cause nearsightedness but also may lead to antisocial behavior and even addiction.

Just as Honour of Kings—aka Arena of Valor—was taking off in 2017, the People’s Daily—a publication referred to by some as the “mouthpiece of the Chinese Communist Party” and frequent host to moralistic opinions—ran an opinion piece comparing the top-grossing game to poison.

After the July 3, 2017 piece, titled “Honour of Kings: Is it entertainment for the masses or a lifetime trap?”, asserted that the game was a carrier of “negative energy,” Tencent lost $17.5 billion in market value. Even before the scathing piece sent shockwaves through the market, the content and entertainment company had already been responding to negative feedback by introducing methods to limit minors from playing its most popular game.

Intoxication

Much as the US and most of the Western world have grappled with the implications of violence in games, China finds itself continually debating the place in society of one of the most entrancing uses of technology. That intoxicating sense of reward, accomplishment, and achievement—gained by earning badges, acquiring virtual items, and actually completing something—keeps people coming back for “just one more level,” the holy grail of game design.

While the attention economy incentivizes ease of player reward, it wasn’t always that way. Dwarf Fortress, Rogue, Ghosts ’n Goblins, Battletoads, and the many point-and-click adventure puzzle games were all designed to be extremely hard. As the entire games industry expanded, developers and publishers toned down the difficulty to attract more “casual” players, culminating in the mobile game revolution with infinitely playable hits like Candy Crush, Clash of Clans, and Honour of Kings.

The basic stance of China’s guardians of culture, however, has remained consistent: fostering the “healthy” development of gaming in China.

“The Chinese government has had youth gaming protection policies for as long as there has been digital gaming in China, or at least for as long as Niko Partners has covered the market, which is now 17 years,” Daniel Ahmad, an analyst at Niko, a research firm that focuses on gaming in China and Southeast Asia, told TechNode.

Anti-addiction policies for PC games have been in place since 2007, when online game operators were required to implement timers for minors. However, when mobile games were taking off in 2014, regulators specifically stated that anti-addiction systems were not needed. It wasn’t until after gaming regulation was put under the remit of the Publicity Department of the Central Committee of the Communist Party of China (aka the Propaganda Department or zhongxuanbu in Chinese) in 2018 that Tencent and Netease began to seriously implement anti-addiction measures for minors.

And yet, while Tencent’s cash-cow may be “poison,” these protections actually have limited impact on margins, according to Ahmad. Jiguang, a Chinese internet research firm, says that 3.5% of Honour of Kings’ user base is 14 or younger, while 22% are between 15 and 19 years old.

Moreover, it’s not just the games themselves, but a whole new industry around games that is proving extremely lucrative. In 2017, Niko Partners predicted the professional e-sports market in China would grow that year to $1.26 billion, not including revenue from regular gamers playing the games themselves.

Another report in 2017, by Chinese research firm iResearch, estimated that the overall e-sports market was worth $13 billion. That same year, Tencent announced an agreement with the government of Wuhu in East China’s Anhui province to build an e-sports “village.” In 2018, the company said they would invest $150 million a year in e-sports. On top of that, the only live-streaming model to grow after the sector cooled off was e-sports and gaming.

Douyu, backed by Tencent and leading the live-streaming industry, is rumored to go public in the US to raise $500 to $600 million. The company is currently valued by CBInsights at around $1.51 billion.

Economic goldmines

Realizing that gaming and e-sports are not only economic goldmines but also vehicles to achieve other goals, including greater prominence on the global stage, the Chinese government has spearheaded initiatives to capitalize on the rapidly growing industry.

In November, Hangzhou unveiled its own e-sports town, built at a cost of RMB 2 billion ($280 million). It is expected to attract more than 10,000 e-sports professionals and RMB 1 billion in tax revenues. The city also plans to invest RMB 15.45 billion ($2.2 billion) in 14 additional e-sports facilities.

In December, Xi’an held a “summit” dedicated to e-sports and signed partnership agreements with prominent teams and event organizers, all of whom will move part of their operations to the city. At the conference, the Xi’an government also announced they would support individual companies up to RMB 100 million (around $14.52 million).

Given that many boom-bust cycles in China are fueled—at least in part—by government support, “smart money” tends to follow where government money flows. If the improving performance of Chinese teams is any indication, including the stunning wins at the 2018 Asia Games (the first Olympic Council inclusion of e-sports), China’s dominance of gaming will soon stretch beyond Asia.

Tencent left out as China approves the release of 80 new video games – TechCrunch

What happened: Tencent and NetEase, two of the largest gaming firms in China, have missed out on the first batch of video game licenses to be issued after a nine-month halt. Tencent said it has 15 games awaiting monetization approval in the pipeline. The approvals come nine months after the state suspended issuing new video gaming licenses in March 2018 due to regulatory restructuring.

Why it’s important: Although the Chinese gaming regulator is restarting the approval process, the thawing process is gradual and subject to tighter controls. To set standards for approval, the state administration rolled out regulation in August last year to limit the number of new online game titles as well as a plan to work on a content rating system. Only 3,000 out of 7,000 titles on the waiting list may receive official licenses in 2019, China’s 21st Century Business Herald reported, citing experts. The country’s gaming industry this year witnessed its slowest revenue growth in at least a decade.

Tencent turns to Southeast Asia after Beijing clampdown – Nikkei Asian Review 

What happened: Chinese tech giant Tencent has signed a five-year deal to give Singapore-based online game-publisher Sea the right to sell its game titles in Southeast Asia. Sea previously distributed Tencent titles on a game-by-game basis. However, the new deal allows the Singapore-based company to distribute games that have not previously published in the region.

Why it’s important: Tencent’s cash cow has been gaming. However, it has run into trouble with year with increased regulation of the sector. Beijing has been cracking down on game developers and has halted the publication of new games. Earlier this year, Tencent’s profit dipped for the first time in 13 years amid the standstill. The company had previously invested in Sea and looks to expand its footprint in the region through its deal with the company amid increased regulation back home. According to a 2017 report by Niko Partners, gaming revenue in the region is set to surpass $4.4 billion by 2021.

Despite a lull in new game titles being approved, revenue in China’s gaming sector should recover by late 2019 and rebound by 2020, but gaming companies will continue to feel pressure on their profit margins, according to a report by market research firm Niko Partners

The lack of approvals comes after the State Administration of Radio and Television (SART) was formed in March to replace the State Administration of Radio, Film, and Television (SARFT), which in turn forms part of a broader push by the Chinese government to strengthen its control over cultural policies. The Ministry of Culture, which also oversaw approvals is also in the throes of restructuring.

However, the regulatory upheaval has yet to be completed and new game titles haven’t been published since March, resulting in diminishing revenue and slow growth in the industry. Niko Partners says the restructuring is due to be complete by the end of 2018, but agencies have until April 2019.

In October, Chinese regulators also limited game publication through a process known as the “green channel,” the only official way to get games on the market since the government froze new approvals. The system was introduced in August and allowed developers to run a one-month monetization trial for certain games

Chinese gaming revenue grew by 46% in 2017, but due to the regulatory shuffle, along with a crackdown on “cultural content,” just 11% year-on-year growth is predicted for 2018. Mobile gaming revenue is expected to reach $15.6 billion, 2.4% lower than projected in April. PC gaming has also been hit, with revenue anticipated to reach $15.2 billion, 3.8% lower than forecast.

In the biggest gaming market in the world, tech giant Tencent has become the biggest loser. The company has lost more than $200 billion in market value this year, in part due to the gaming crackdown. Tencent has announced its third large-scale restructuring in its 20-year history in order to focus on enterprise users, with a major push towards cloud computing.

Pangu Game (盘古游戏), a game development studio under NetEase, is said to be merged into tech R&D and gaming department Leihuo (雷火), according to an anonymous staff member at NetEase who leaked the information in a WeChat conversation (in Chinese).

Pangu is going to be a sub-department at Leihuo, but it’s unconfirmed whether there will be any personnel layoffs, a person close to the matter says, according to local media (in Chinese).

Leihuo is the development force behind some of NetEase’s most influential self-owned games, which include online game Qiannv Youhun (倩女幽魂),  based on an ancient love tale of a fairy ghost. The game invited celebrity Liu Yifei as a brand representative, but is widely criticized by players for being extremely money consuming.

“I haven’t seen any confirmed information on this. When I was there a few years ago, I heard that Pangu was originally part of Leihuo,” a former employee at NetEase Games told TechNode. “But [current NetEase Games staff] I’ve talked to know that Pangu is not doing very well,” they added. There is no public information of either Pangu or Leihuo’s performance.

The merger rumor was a surprise to many in the industry. On October 29, Pangu just co-established a center for game development with the animation faculty of China’s Central Academy of Fine Arts. Pangu and Leihuo also co-organized a game show for fresh developers at the same event. It is unclear whether it was a sign of an already on-going merger. However, considering tightening state regulation on the general content industry, NetEase’s decision (if true) is a necessary step to restructure the business and optimize input-output balance.

The company is now hoping to count on gaming, e-commerce, and advertising services to drive future growth. William Ding, Chief Executive Officer and Director of NetEase, commented in August that the company’s “PC-client and mobile games continue to serve as dual growth engines”.

According to the second quarter’s fiscal report of NetEase, online game services’ net revenues were RMB 10.1 billion (US$1.5 billion), up 6.7% compared with the second quarter of 2017. NetEase is going to release the 2018 third quarter financial results on November 14.

China Halts Special Approval Process for New Games —Bloomberg

What happened: Chinese regulators are no longer granting licenses through a process known as the “green channel,” the only official way to get games on the market since the government froze approvals for new games in March. The “green channel”  was introduced in August and allowed publishers to run a one-month monetization trial for certain games. The reason behind the freeze is an overhaul of the approval process but it is still unclear when will the overhaul end. Before the gaming approvals halt, China had already had the strictest rules for games’ content in the world.

Why it’s important: China is the largest games market in the world with $38 billion in estimated revenue. Many of the games are still available through the grey market with Chinese gamers now flocking to the Steam platform owned by US company Valve. The biggest loser is Tencent who previously made much of its revenue from gaming. Among other companies affected are NetEase and Bilibili while Japanese game creators are also seeing their shares decline.

对话趣头条投资人沙烨：“精英”对世界的理解和现实有脱节 – Tencent Tech

What happened: According to people close to Nasdaq-listed news and content distribution platform Qutoutiao, the Tencent-backed company is recruiting staff for a new gaming team.  Qutoutiao, for the first phase of the gaming plan, would focus on WeChat games. Visual content such as photos and short videos will also receive more strategic attention from Qutoutiao in the future. During an interview with Tencent Tech, an early investor of Qutoutiao said the company will still target lower-tier cities and areas.

Why it’s important: Qutoutiao, with Tencent as an investor, will see channel advantage for its games targeting WeChat platform. However, with ByteDance’s Jinri Toutiao and other information platform already fighting in the market, and gaming industry in innovation bottlenecks and macro environment turbulences, Qutoutiao’s path to substantial commercial performance breakthroughs is tough. Meanwhile, Qutoutiao’s strategy eyeing less-developed internet markets in lower-tier cities and areas is similar to group-buy Pinduoduo’s – modifying business models and digital projects already successful in larger cities and using them in non-cultivated regions for new market opportunities.

Chinese e-sports video streaming app Douyu has been taken down from the Chinese iOS app store. The news comes just one day after “WeChat rival” Bullet Messenger was removed from the iOS App Store on October 9.

Bullet stated yesterday that the reason behind the removal was that certain content provided by its partner was reported for possible copyright violations. However, the fast-rising messaging app which gained attention after topping China’s iOS App Store chart soon after its launch in August has faced complaints over loose security settings and for spreading vulgar content. In the meantime, Bullet has been restored to the Chinese version of App Store and is again available for download.

Douyu is still available on the mainstream Android stores, but only in a stripped-down version that allows users to view but not upload videos. In addition, the pared-down app doesn’t allow viewers to tip streamers.

Users started noticing Douyu’s absence from China’s iOS store as early as October 3, Securities Daily reports. As of yesterday, however, the US-based Apple store still allowed downloads of the original app.

In response to the disappearance, an official Douyu account on a chat forum states that: “we are actively coordinating, please wait patiently for [the app] to go online again. The Android app can be downloaded via QR code on the official site.”

Douyu customer service personnel confirmed with TechNode that the company is working to get the app up again, but was not able to provide a timeline or further details.

The news comes at a bad time for the Tencent-backed company, which was reportedly gearing up for a US IPO later this year. The move would have followed in the footsteps of live-streaming competitor Huya, which was listed on the New York Stock Exchange in May.

Douyu’s takedown from the China iOS store comes as China continues to tighten online content curbs.

Earlier this year, popular apps such as Toutiao, Kuaishou, Bilibili, and Phoenix News were taken down over various periods of times for rectification and cleaning up of content deemed “inappropriate” by the state. In the interlude, multiple apps released stripped-down versions similar to Douyu’s current Android option, allowing users to view but not upload content.

A total of 46 apps on 21 app stores were removed in Q1 2018, according to data from the Ministry of Industry and Information Technology. In September, the government launched a new clean-up campaign directed specifically at live-streaming, further raising the bar for online content providers in China.

This article was updated October 10, 2018, to add that Bullet Messenger is again available on Apple’s App Store.

Tencent has begun enforcing real-name verification for all players of its mobile multiplayer hit “Honour of Kings” (known as “Arena of Valor” outside of China) as part of a revamp of the gaming system.

The upgrade connects the game with China’s public security database to better enforce rules, including those limiting the amount of time minors can spend playing, according to Tencent.

The system will stop those who do not verify their identity in time from logging in. Children under 12 years old will be limited to playing one hour a day between 8 am and 9 pm. Minors over 12 will be restricted to two hours a day. Individuals awaiting approval will be subject to the same limits imposed on those under 12 years old.

Tencent has been focussing on the gaming habits of minors amid increased government scrutiny of video game publishers. Regulators previously criticized the company for its perceived contribution to video game addiction in minors. In June, Party mouthpiece People’s Daily blasted Tencent, referring to “Honour of Kings” as “poison” and said greater regulation of social games is needed.

As a result, Tencent has introduced a number of measures to curb excessive underage usage. In addition to time limits, the company added a feature that notifies account holders when a suspected minor’s in-game spending reaches RMB 500 a month, as well as greater parental controls.

Despite this, a broader crackdown on cultural content has seen the company’s gaming revenue plunge, while the sector witnessed its slowest first-half growth in ten years. The company’s second-quarter profits fell for the first time since 2005, in part, due to the removal of popular titles.  The company was forced to remove blockbuster “Monster Hunter: World” from its WeGame platform—wiping out $15 billion from its market value— and shut down its popular poker game “Texas Hold’Em”. 

In addition, it had to alter “PlayerUnknown Battleground“ (PUBG) last year before it was allowed to distribute it as it was deemed too violent.

China’s gaming industry as a whole has suffered as the Communist Party’s propaganda department has taken over licensing new online games. Approvals of new titles have slowed amid regulatory restructuring, with no new licenses being approved in the past six months.

Century Huatong to Buy Shengyue Network for USD4.35 Billion – Yicai Global

What happened: On September 12, Zhejiang Century Huatong, a Shenzhen-listed gaming ecosystem building company, revealed its draft plan to purchase 100% stake of Shenyue Network, the online gaming affiliate of former Nasdaq-listed Shanda Games. The value of the deal is estimated at RMB 29.8 billion ($4.4 billion). Shengyue Network’s operating income from Shanda Games was RMB 4.19 billion and net profit was RMB1.5 billion last year. Zhejiang Century Huatong has suspended public stock trading.

Why it’s important: As China’s gaming industry faces pressure from both government and market, business owners are eagerly seeking proper deals to optimize asset structures and operation. Zhejiang Century Huatong, a lesser-known company to people not familiar with China’s gaming industry, is taking the chance to acquire more resources. However, there is no guarantee that the big deal will bring positive results. Calculating from fiscal results audited for 2017 annual reports, the average net profit of family entertainment and software (including games) A-share companies declined 233.42% year-over-year to RMB 494 million.

Bilibili, the Chinese video sharing and ACG (animation, comic and game) community, has made its debut on the world’s top video game distribution platform, Steam, as the publisher for two new titles of The Con Simulator and Invaxion, expanding to the PC gaming sector. Neither are available for purchase, but are listed on the Steam platform.

Developed by DGSpitzer, The Con Simulator is a simulation game for players who are dreaming about organizing their own comic con. Invaxion is a music-themed casual game developed by Nanjing based-developer Aquatrax. The two games will be launched in the fourth quarter of this year.

Started as a video streaming site, Blibili quickly grows to be the hub for China’s 2D culture, which is characterized by fans that develop a strong attachment to 2D characters in cartoons, table cards, comics, games, and novels. As an important part of the sub-culture as well as a highly lucrative business, gaming has become a core business and major revenue source for the company.

Revenue from mobile games, where the company has been focused so far, surged 61% year-on-year to $119.5 million, accounting for 77% of the total $155.1 million revenues booked in the quarter ended June 30. Expanding into PC video sector would further brace up the company’s gaming business.

But tapping into China’s highly crowded gaming sector isn’t an easy task when facing competition from industry giants like Tencent and NetEase. What’s more, the whole industry has felt the chill wind of a halt in game approvals during a countrywide content crackdown. Tencent reported profit a decline in the second quarter.

Stricter government control is also exerting pressure on the company’s core business. Along with 19 video apps, the company’s ACG-focused video app was ordered on a month-long suspension by the state for inappropriate content. The company, however, claimed that this wouldn’t have an overall negative effect on their business.

Esports: Move to less violent games for 2022 Asiad – Alisport CEO – Reuters

What happened: Zhang Dazhong, CEO of Alibaba’s sports arm Alisport, said e-sports will shift away from violent games to sport-focussed titles for the 2022 Asian Games. Zhang’s comments come after the 2018 event, which served as a trial for the e-sports community. He said also the discipline would need to change to ensure inclusion in the Olympics.

Why it’s important: In April, International Olympic Committee president Thomas Bach said violent video games go against Olympic values. As a result, the inclusion of titles like League of Legends will be unlikely to make the cut. Zhang also made reference to Beijing’s recent crackdown on mobile gaming, saying a move to sport orientated games was taking place globally. The Chinese government plans to limit the number of titles released every year. Zhang said the government is “concerned” about violent content, but is supportive of e-sports.

Shares of Tencent and NetEase dipped Friday morning as the State Administration of Press, Publication, Radio, Film and Television of China (SAPPRFT) rolled out regulations against online games Thursday night.

According to the government paper, the Administration will regulate and control the total number of online games and limit the number of new online game titles. The Administration will also work on a content rating system that carries age recommendations and limit the time the underage can play online games for.

Further regulation on games is likely to worsen the already gloomy license situation in the gaming industry. Earlier in August, Tencent said a freeze on game approvals from Chinese authorities has negatively affected its revenues and it did not know when the situation would be resolved. Gaming revenues are the biggest source of income for Tencent.

The regulation is part of China’s newest campaign to “control and prevent myopia of children and teenagers.” The campaign was jointly launched by eight state administrations including the Ministry of Education, General Administration of Sport of China, Ministry of Finance and SAPPRFT on Thursday after China’s president Xi Jinping expressed concerns over the rate of myopia in Chinese children and teenagers earlier. Before Xi’s concern, the World Health Organization’s report shows there were 600 million nearsighted people in China and the rate of myopia in Chinese youth topped the world.

Despite the common belief that close-up activities can cause myopia, new research shows that the true cause of near-sightedness is insufficient sunlight.

The Chinese authorities have considered online gaming negative for the youth and tried to limit the younger generation’s access to it. Tencent launched an anti-obsession system last July when the state media criticized the company’s popular game Honour of Kings having a negative influence on Chinese youth. The system limits the time for underage player to at most 2 hours a day.

China’s console and TV-based game market will hit $736 million in 2018-Venture Beat

What happened: The total revenue for sales of game consoles, console game software and TV-based game software in China is projected to reach $736 million in 2018, up nearly 14.6% YoY, according to a report from Niko Partners. Of the total revenue, Niko projects 2018 console and TV-based games software revenue to reach $471 million, up 32% YoY. But the hardware revenue is projected to down 7% YoY to $265 million.

Why it’s important: When China lifted its decade-long ban on game consoles in 2014, the country expected the industry to experience a rapid boom. However, console makers and game developers are still stumbling in the contest for relevance in one of the world’s largest gaming markets due to the late arrival of consoles and users’ increasing favor for mobile devices. Compared with key segments of PC and mobile gaming, the game consoles sector is often overlooked. “Sony, Microsoft, domestic competitors, and possibly even Nintendo are active in China and sales have surpassed [three-quarters] of a billion dollars — so despite the barriers to entry, success is profitable,” according to Lisa Cosmas Hanson, managing partner and founder of Niko Partners.

WeChat mini programs were a highlight for Tencent’s strategic initiatives in recent months as online gaming revenue slides, according to Tencent’s 2018 second-quarter earnings release.

According to Tencent, WeChat mini programs have reached 200 million daily active users and has a sizable developer ecosystem. Tencent views mini programs as complementary to mobile apps, as mini programs generate traffic and download for corresponding native mobile apps. Mini programs will contribute to the development of the company’s advertising and cloud business, according to the company.

Tencent first rolled out WeChat mini programs in early 2017, which allows users to use services from different companies on the WeChat platform without actually downloading the application from app stores. Mini programs are especially popular with transportation, retail, restaurant and gaming service providers.

As one of China’s most popular application, WeChat has reached 1.06 billion monthly active users, a 9.9% year on year growth, as user activities in WeChat Mini Games and Moments continued to increase, driving up time spent per user per day in those activities.

Tencent’s conference call of the earnings specially mentioned WeChat Pay, a built-in payment feature within WeChat and reported that monthly active users of Weixin Pay exceeded 800 million.

QQ, another social network application within Tencent’s Communication and Social segment, showed 5.5% decrease of monthly active user accounts to 803.2 million while smart device monthly active users reached 708.6 million, a 7% year over year increase. QQ is especially popular among young users as growth among 21 years or below showed double-digit growth year on year.

Revenues from social networks reached RMB 16.9 billion, 23% of Tencent’s total revenue, the second biggest source of income for Tencent.

However, strong performance from social networks didn’t comfort investors as shares of Tencent dropped 4.8% as the market opened Thursday morning, due to slowing growth from online games. Year-on-year revenue growth from online games, Tencent biggest source of income, decelerated to 6%, due to non-monetization of popular tactical tournament games in China. Revenues from online game achieved RMB 25.3 billion and made up 34% of the total revenues.

Tencent games revenue in focus after China blocks “Monster Hunter: World” – Reuters

What happened: A stock price tumble wiped out over $15 billion in Tencent’s market value amid concerns about its gaming revenue. The fall came after regulators blocked the sale of blockbuster game “Monster Hunter: World” on Tencent’s WeGame platform. Analysts expected the Capcom-developed game to be one of Tencent’s biggest sellers but its listing disappeared within a week of its release after regulators reportedly received a large number of complaints about its content.

Why it’s important: China’s entertainment industry has increasingly been at odds with regulators in recent months. Short video platforms and video game distributors and developers have been hit hard in a crackdown on “vulgar” and “inappropriate” content in a government-led move to increase its control over cultural content. Tencent had to alter “PlayerUnknown Battleground” (PUBG) last year before it was allowed to distribute the game as it was deemed too violent. Additionally,  after China’s content regulator went through reforms, many firms are still waiting to be granted licenses for new games which have been on hold since March.

Monster Hunter: World, a popular monster hunting and killing game developed by Japanese studio Capcom, lived for five days after Tencent launched it on the company’s own platform WeGame on August 8.

According to an open statement WeGame released this morning, state regulators have canceled the game’s operating license in China due to a “large number of complaints.” Neither the statement or any state units clarified the source of the complaints.

The company closed sales of all versions of the game from 8:00 am this morning (August 13, 2018), including DLCs. Players who have already made purchases can claim an unconditional refund by 8:00 am, August 20. Players who wish to keep the game can still play, but WeGame will not be responsible for gaming experience after August 20.

WeGame also said in the statement that part of the game’s content does not meet regulatory requirements. The platform sincerely apologized for the inconvenience the issue has caused and promised to improve operation by better following regulation in future.

Monster Hunter Online, also on Tencent Games, has not announced any abnormal operation issues. The game is also organizing special Summer season hunting missions.

Monster Hunter: World is considered one of the best of the whole Monster Hunter series. Besides Tencent’s cooperation with Capcom, Chinese players can purchase the game from Steam, PlayStation, or Xbox. To encourage players to purchase WeGame’s simplified Chinese PC version, Tencent offered special discounts and promised it would keep the game’s original designs. Pre-order of the game in China hit 1 million.

TechNode checked China’s leading live streaming platform Huya, at 17:30 pm (local time) on August 13, 2018, 81 channels were broadcasting Monster Hunter: World and 38,593 viewers were watching. 14 channels were broadcasting Monster Hunter Online and 2,469 views were watching.

Channels highlighted the gaming platforms, and there were quite a few WeGame Monster Hunter: World broadcasting entries. This contradicts the statement which puts improper content as one reason why Tencent pulled the game out. Or, if what Tencent says is true, Huya is allowing the “improper” content to circulate due to huge audience demand.

Financial Times reports that a source blamed bureaucratic infighting as the real reason. But there is no public channel to confirm.

The gaming and finance markets are now worried about Tencent’s sustainable growth capability. Lacking core creativity, Tencent has been buying stakes in world-leading game studios including Ubisoft, Riot, Epic, and Supercell. The company also supports indie games with Tencent A.C.E Program to acquire emerging designs and early commercial design opportunities. As glories of its legendary game Honor of Kings fade, Tencent is seeing a slowing growth of related profits.

This time, Monster Hunter: World is not only a concern for Tencent’s revenue growth. A signal the case releases is clear: big companies are small in front of the country’s regulation, and China’s lucrative gaming market has its own rules and thresholds. The case may force companies hoping to enter China, either with local players or alone, to think twice about any unforeseen risks and hidden costs.

NetEase Reports Second Quarter 2018 Unaudited Financial Results – NetEase, Inc

What happened: Chinese leading internet and online game services provider NetEase reported an unaudited profit of RMB 2.1 billion for the second quarter ended June 30, a 30% decrease compared with the same period last year. Online game services, the biggest segment of NetEase’s revenues, increased 6.7 percent compared with the second quarter of 2017, and e-commerce net revenues increased 75.2 percent.

Why it’s important: NetEase seems to be recovering from the unsatisfying earnings last quarter. In the first quarter, NetEase’s profit dropped 81%, compared with the first quarter of 2017 and now the decrease has narrowed to 30%. The increasing gaming revenues were mainly due to the strong performance of their existing games Chu Liu Xiang, Knives out and Identity V. kaola.com and Yanxuan, drove the growth of NetEase’s e-commerce segment. In the second quarter, Gaming made up 61.8% of the total revenues and e-commerce 27%.

Chinese game apps are spreading abroad like wildfire and the US has become one of their top markets. From the first half of 2017 to the first half of this year, Chinese game makers raised their profits by 52% in the US earning more than $600 million, according to new data from App Annie.

Downloads of Chinese games in the US iOS App Store and Google Play Store increased by 54% during the same time. That’s close to 200 million downloads.

This follows the overall trend of Chinese mobile games going abroad. According to an earlier report from App Annie published July 31, during the first half of 2018, mobile game publishers hit $2.6 billion in overseas revenues from the iOS App Store and Google Play Store, a 40 percent year-on-year hike.

Overseas expansion has become a necessity, according to the report, as China experiences a slowdown in domestic mobile game revenues. Kern Zhang, head of new business at App Annie in China, told China Daily that the slowdown is due to oversaturation and “disappearance of the demographic dividend” AKA young people.

However, there might be other reasons Chinese game makers are going abroad. China’s State Administration of Radio and Television (SART) has not granted licenses for new games since March 2018, causing a drastic slowdown in industry growth. Mobile games have been hit the hardest, with year-on-year growth lunging from 50% to 13%.

As for the US market, Chinese action game apps were some of the most downloaded games. Tencent’s Player Unknown’s Battlegrounds (PUBG) ranked No. 1 in downloads in the US during the first half of the year while NetEase’s Terminator 2: Judgement Day ranked third.

Casual mobile games were also seeing high download rates in the first half of 2018 including Love Balls (恋爱球球), Word Crossy, Draw In (完美的线), Rolling Sky (滚动的天空), and Dancing Line (跳舞的线).

Strategic games still dominate the list of games with the highest income. FunPlus’s Gun of Glory and King of Avalon: Dragon Warfare (阿瓦隆之王：龙之战役) are ranked first and third respectively. IGG’s Lords Mobile (王国纪) is ranked second with another title from the company placing itself at no. 9—Castle Clash (城堡争霸).

Two games from Elex, Clash of Kings (列王的纷争) and Miracle Nikki (奇迹暖暖), placed themselves fourth and fifth respectively. Word Crossy is the only casual game that placed itself in the top 15 according to revenues.

China’s gaming industry suffers revenue slowdown as new government body kills approval of upcoming titles – SCMP

What happened: China’s State Administration of Radio and Television has not granted licenses for new games since March 2018, causing a drastic slowdown in industry growth. Mobile games have been hit the hardest, with year-on-year growth lunging from 50% to 13%. However, industry players have also attributed slowing revenue growth to other factors including market saturation and the rise of short video apps.

Why it’s important: The lack of approvals comes after the State Administration of Radio and Television (SART) was formed in March to replace the State Administration of Radio, Film, and Television (SARFT), which in turn forms part of a broader push by the Chinese government to strengthen its control over cultural policies. Short video platforms such as Douyin have been some of the hardest hit after numerous crackdowns on “vulgar” and “inappropriate” content.

巨人网络停牌重组 将通过收购Playtika进军人工智能 – Xinhua Net

What happened: Giant Network, a leading game development, operation, and publication company, announced its acquisition of Playtika, a smart entertainment game provider based in Israel, for $4.5 billion. China’s regulatory department is reviewing the acquisition. Giant Network hopes the deal would allow it to cut into the field of artificial intelligence. Meanwhile, at the moment, Playtika has no portfolio games operating in China.

Why it’s important: Giant Network’s acquisition signals Chinese companies’ increasing diverse artificial intelligence strategies. Directly purchasing AI product design or R&D assets is a regular approach but may pose high opportunity cost thresholds for some companies. The Playtika case provides an alternative way to enter a sector that hasn’t seen much AI applications, including user data and game operation optimization. Playtika’s major casual casino card games will be a good use case for Giant Network to learn through acquisition.

Chinese e-commerce giant Alibaba has been quietly bolstering its gaming business over the past two months, renewing its efforts into a field that’s historically the domain of arch-rival Tencent. The company has added a total of 16 mini games to its online marketplace Taobao to date.

The renewed initiative started this April when Alibaba acquired the exclusive distribution rights for Travel Frog in mainland China. The Chinese-language and localized version of the Japanese hit was then added to China’s top e-commerce site Taobao. The sale of Travel Frog’s official products from t-shirts, plush toys, key-chains to cushions surpassed RMB 100 million (around $14 million) around one month after the launch of the game. Other mini-games available on Taobao platform are casual games with simple gameplay, such as Gomoku and matching games.

Alibaba is hasn’t been very active in gaming, but it has long been a field the giant has been eyeing, just like what e-commerce is for Tencent. One of Alibaba’s earliest gaming endeavors can be dated back to 2014 when it integrated a gaming center in Taobao. Gaming feature was also added to Laiwang, Alibaba’s WeChat counterpart to take on Tencent back then. But both of the gaming and social efforts fell flat.

Alibaba’s renewed gaming push comes as a part of its strategy to attract users with premium contents through live streaming, short video, etc. At the beginning of this year, Alibaba invested RMB 1 billion in mobile gaming distribution through gaming unit Ali Gaming.

Tencent’s mega-hit mobile game Honour of Kings is no doubt one of most successful games of the Chinese gaming giant. It still is one of the cash cows of Tecent. But as the craze surrounding the three-year-old game fades off, Tencent is in need of more new popular games to maintain its domination in China’s gaming industry.

App Store marketing service provider AppBi revealed in a recent report that Honour of Kings reached its peak with a profit growth rate of 29 percent in 2016. But its popularity started to drop with policy restrictions and growing competition. The heat surrounds Honour of Kings and the purchase of users declined gradually.

China’s mobile gaming industry is dominated by Tencent and NetEase. Among all games listed on “Top 20 Paid Games” from 2014 to 2018 Q1, Tencent constitutes 50% of the total, while Netease was the second with an 18 percent share.

In Q1 this year, Net Ease is catching up with its new game“决战！平安京” topping the fastest growing category. The best performing game by Tencent is QQ Speed, which recorded a $170 million or 19 percent YOY profit growth in Q1 this year. Compared to previous years where Tencent and Netease carved up most of the profits, several gaming startups become the budding publishers in China’s game arena.

Mobile revenue still relies heavily on the game industry. According to the recent report released by China Culture and Entertainment Industry Association (CCEA), more than 70% of APP income was generated by game players.

Since 2014, China experienced an explosive growth in the gaming market. AppBi research shows the total revenue had jumped almost four times from 2014 to 2017. In 2018 Q1, China mobile game revenue reached $2.3 billion, equivalent to the total in 2014.

AppBi studied every year’s Top 20 Games in Revenue in IOS store and found that most of the top publishers are either invested by Baidu, Tencent, and Alibaba, or BAT itself. Small startups are suffering increasing difficulty to survive or go independent.

From 2016-2018Q1, most of the Top 20 profitable games are well-established IP or Chinese fantasy category, which proven to be very popular among Chinese consumers. There was a significant lacking in originality and innovation.

With more players generated by games like the Honour of Kings, China mobile users are expected to exceed 550 million, according to CCEA. However, the game market still requires more originality, talents, and better data-driven marketing strategy, the company pointed.

Image credits:AppBi

Tencent Games has updated its warning system for account holders when minors overspend on its platform. The system will send out a warning when underage players are suspected of spending RMB 500 or more per month.

The system, entitled “Underage User Game Spending Reminder” (未成年人遊戲消費提醒, our translation), previously had a threshold of RMB 500 per day. However, this has now been amended to the same amount but over the period of a month.

The previous amount would allow minors to spend up to RMB 15,000 over a 30 day period and could amount to enormous charges for QQ account holders.

The reminder system currently applies to games including Honour of Kings (王者荣耀), League of Legends (英雄联盟), CrossFire (穿越火线：枪战王者), QQ Speed Mobile (QQ飞车手游), Naruto Mobile (火影忍者手游), Miracle Nikki (奇迹暖暖), Dungeon Fighter Online (地下城与勇士). It said it expects to launch the feature on other games in the future.

Gaming addiction has been highlighted as a major problem in China as high profile figures, including those from the country’s top political advisory body. Officials and media have called out gaming companies, including Tencent,  for enfeebling the younger generation. Tencent has often faced scrutiny for its perceived contributions to gaming addiction. It was criticized last year by the state-owned People’s Daily after the company announced playing time limits on Honor of Kings.

The government newspaper called the game “poison,” and said that it expected there to be regulations put in place to curb addiction to social games. China was the first country to declare gaming addiction a “mental disorder,” with parents taking controversial measures to rid their children of the addiction.

This week, John and Matt take a look back at 1 year of podcasting and pull out the best part of the best episodes. This is part 1 of 2.

Links

• 04: Interview with Florian Bohnert
• 10: Influencers in China & the future of brands with Elijah Whaley
• 15: Baidu ain’t that bad with Kaiser Kuo
• 18: China’s gaming & e-sports industry with Daniel Ahmad
• 19: China’s $20 billion news app with Dannie Li
• 20: Alipay vs WeChat & why smile to pay matters

• John Artman, @knowsnothing, TechNode
• Matthew Brennan, @mbrennanchina ChinaChannel

• iTunes
• RSS feed
• China Tech Talk.com
• Music: “Theme from Penguins on Parade” by Lee Rosevere, Music for Podcasts 3

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Chinese technology companies have witnessed amazing growth in the past half decade. Of the world’s top 20 internet firms, nine originate from China, even though just two went public prior to mid-2013. Tencent’s market value has increased by a factor of seven in the past five years Alibaba, which only IPOed in 2014, is now the country’s most valuable company.

The meteoric growth of China’s internet firms can be partly attributed to the number of people accessing the internet. China has an online community that is more than twice the size of the total population of the US and exceeds the entire populace of Europe.

These insights form part of famed venture capitalist Mary Meeker’s 2018 Internet Trends Report. The document contains everything from global e-commerce trends to internet policy, and more importantly, China’s rising influence in internet-related markets.

Development of artificial intelligence

The explosive growth of digital data in China is providing the opportunity for the country to increase its artificial intelligence capabilities rapidly. China did not enter any international AI challenges until it 2011, at which point it placed 11th in the Large Scale Visual Recognition Challenge. However, it has advances hastily in the past few years. In Stanford’s ongoing Question Answering Dataset, Chinese organizations have dominated the top five places.

While the US is currently ahead in the race to advance AI technologies, China is focussed on gaining ground. The Chinese government hopes to be the at the forefront of development by 2030. The most valuable AI unicorn in the world, SenseTime, calls China its home.

Numerous AI research centers have been launched this year in Beijing. In February, city officials launched an international research center led by CEO of Sinovation Ventures, Kai-Fu Lee. Four months later, in May, Qualcomm opened an AI department dubbed The Qualcomm AI lab.

Technology is driving domestic consumption

China’s economy is increasingly driven by domestic consumption, representing a 62% contribution to GDP growth, compared to 35% in 2003. Internet-based consumerism is propelling this trend with the proliferation of e-commerce.

Online-to-offline (O2O) are changing the face of retail in China. Numerous outlets are beginning to provide both online shopping capabilities and brick-and-mortar stores. Alibaba’s Hema has shown that physical stores with online capabilities can dramatically increase its number of transactions. The combination of daily online and offline purchases have enabled the company to facilitate twice as many sales as its competitors.

Unlike countries like the US and UK, which transitioned from computers to mobile devices, China has remained a mobile-first economy. As such, the country’s mobile data consumption to drive these services increased by 170% year-on-year.

Local tech companies are also spreading their services overseas.  While Alibaba’s non-China revenue makes up just 8% of its total, it has seen over 65% year-on-year revenue growth in its international operations. The company has been investing heavily in the Asian market, with several investments in Pakistan, India, Indonesia, and Singapore.

Mobile payments dominate

Alibaba’s Alipay still commands the mobile payments sector. The company controls 54% of the market while WeChat Pay holds 38%. The country’s total mobile payment volume reached nearly $16 trillion in 2017.

The prevalence of mobile payment platforms is also allowing for growth in the car and bicycle rental sectors. The country is responsible for 68% of global trips on these rental platforms. Bike rental companies have a presence in most of the country’s major cities. However, due to the saturation of the market (and city streets), the government has been cracking down on the continued deployment of bicycles to selected cities around the country.

Video services have begun dominating the entertainment sector

In 2013, the country spent 60% of its daily entertainment time on social media and 13% on video platforms. As of March 2018, video services have seen a dramatic increase in time spent on their platforms, up nearly 70%.

Short-form videos are driving this upward trend. Users of Douyin and Kuaishou spend an average of 52 minutes a day on these platforms. Additionally, online video content budget exceeded that of China’s TV networks for the first time in 2017. The increased budget is enabling platforms like iQiyi, Tencent Video, and Youku to produce original content and license exclusive films and TV series on their platforms.

China loves social gaming

Chinese gamers spent most of their time on team-based multiplayer games, including Honor of Kings and PUBG Mobile. The country is also home to the biggest computer game company in the world. Revenue from computer games reached almost $30 billion, the highest in the world.

Tencent’s recently published financial results are a testament to this. The company reported a 26% increase in gaming revenue in May.

iDreamSky, the Shenzhen based mobile game developer notably responsible for the development of popular titles “Temple Run” and “Subway Surfers”, is planning to relist on Hong Kong stock exchange market in a deal that could raise around $300 million.

iDreamSky Technology is one of China’s largest independent mobile game publishing and developing platforms in China. Founded in 2009, company first prospered as a game publisher that helps well-known international mobile game developers to gain access to China market. The company distributes these games through both its proprietary distribution channels and third-party channels, such as app stores and device pre-installations. The company is also moving forward with in-house game development in recent years.

After getting listed on the Nesdaq market in 2014, the company joined the flock of US-listed mainland companies that have been re-listing on the A-share market, which has been recording a bull run since early 2015. After filling in the privatization offer in June 2015, the company got delisted from the US market on September 7^th, 2016.

The company has generated a revenue of RMB 1.76 billion ($275 million) with profit hitting RMB 151.9 million in 2017. It’s monthly active users surpassed 1.24 million in Q4 2017, up 20% YOY, according to the company prospectus.

As the largest shareholder in the company, Tencent holds a 20.65% stake through its wholly-owned company Tencent Mobility Limited. In addition, the company has attracted several celebrity investors such as Wang Sicong, the only son of China’s richest man Wang Jianlin, and Leong On-kei, Macau billionaire businesswoman and the fourth “wife” of Macau tycoon Stanley Ho.

Last Friday, Huya, the game streaming arm of YY, raised $180 million with its initial public offering on the New York Stock Exchange. The company offered 15 million American depositary shares at $12 per share, the high end of its estimated ADS price. The prices of the company’s shares have since jumped and the closing price of the company’s stocks was $18.38 yesterday.

The company is backed by YY and Tencent. In a statement issued by Huya after the offering, the company announced that its parent company would hold 54.9% voting power in the company, while Tencent would control 39.5%.

In the company’s IPO prospectus report, Huya stated that it is currently the largest game live streaming platform in China, having reached 86.7 million average monthly active users (MAU) in the fourth quarter of 2017. The company also reported revenues of $335.8 million (RMB 2,184.8 million) in 2017, a whopping 174% increase from the year before.

According to local media, Dong Rongjie (董荣杰), the CEO of Huya, was very emotional about his company’s IPO. “Huya’s public listing is an important turning point for China’s game streaming industry. After this, we plan to continue on integrating our resources and strengthening our collaborations with our partners upstream and downstream,” Dong says. “For us, this is just the beginning.”

The company has come a long way since its establishment in 2012. Huya was one of the earliest players in China’s game live streaming market. In 2014, its market supremacy began to be challenged by Douyu. Today, Douyu is still Huya’s biggest competitor and the race between the two live streaming companies remains too close to call. Earlier this year, there were also rumors that Douyo was planning for an IPO in Hong Kong. According to QuestMobile, Huya boasted more MAUs than Douyu this March, but data from a Jiguang report also shows that the latter actually surpassed the former in market penetration rate in February.

Tencent, Huya’s second-largest shareholder, has also invested heavily in Douyu. In March, news media reported that both Huya and Douyu had received equity financing from the internet giant. Huya secured $461.6 million in its series B financing round led by Tencent; Douyu received $630 million (RMB 4 billion) worth of financing from the company. Prior to that, Tencent invested in Douyu twice, leading a $100 million B financing round along with Sequoia and Nanshan Capital in March of 2016 and participating in a series C financing round worth RMB 1.5 billion ($236.5 million) in August that same year.

Research from a Frost & Sullivan report shows that China is currently the world’s largest gaming market. In 2017, the country had 646 million gamers and its numbers are estimated to grow to 917 million in 2022. Game streaming in China, along with other sectors of live streaming, is a fast-growing industry. Last year, the revenues of game streaming were worth $1.2 billion, a significant increase from the $121 million the industry yielded in 2015. According to the report, projections are that revenues will reach $4.9 billion in 2022.

Despite the fact that Huya’s public trading seems to be off to a rosy start, industry analysts are predicting there will still be many challenges awaiting the live streaming company in the near future. Some call to question Huya’s profitability as the company had been incurring significant losses these past few years. One of the greatest expenses for Huya and other game live streaming companies is the recruiting of talent, with the revenues of these companies depending highly on whether or not they’re able to attract popular live streaming hosts to their platform. It’s one of the risks that Huya itself has also admitted to; in the prospectus, Huya stated that the ability to attract and retain broadcasters is crucial to the company’s survival in a highly competitive market and that failure to do so would adversely affect the company’s financial conditions.

In March last year, South Korea allowed the US to install the Terminal High Altitude Area Defense (THAAD) missile system on its soil. Since then, China has launched a series of retaliatory moves against the neighboring country. The unofficial boycott has affected a group of booming industries that range from pan-entertainment to tourism.

As a part of the move, Beijing has refused to issue new licenses for games made in South Korea. This practically prevents any new South Korean titles from entering the country, because since 2016 all games must receive the governmental approval before they can be distributed in China.

As of April this year, not a single of China’s 412 authorized foreign online games were developed by a South Korean gaming company. Meanwhile, the Korean government licensed 111 Chinese online games, granting Chinese game developers a combined KW 200 billion (around RMB 1.18 billion) of revenue, up KW 80 billion (RMB 475 million) YoY.

Historically, Chinese and South Korean game developers and publishers have worked together very closely. China has been a top export destination for South Korean games, but the blockage is slowing down the booming industry. In Q1 2017, South Korea’s gaming industry exported a value of $359 million, down 14.2% YOY and 8.2% MoM. The year-long blockage not only affects South Korean gaming companies but also their Chinese counterparts. There are rumors about the withdrawal of THAAD system, but nothing has come of it.

TechNode talked with Chinese and South Korean gaming companies at Playx4, a South Korean game expo to see what insiders have to say about the changing dynamics of the Sino-Korean gaming industry.

As a publisher helping overseas games, especially South Korean games, to enter China, the team behind Miaoju Internet Technology is adopting a wait-and-see attitude.

“Given the circumstance, we can do nothing but wait. No one wants to touch the government’s baseline. In order to get prepared for possible policy shifts, we participated in several gaming events in South Korea, Japan, and Taiwan so as to keep track of the latest trends,” Jin Guang, overseas business director of the Hangzhou-based company told TechNode.

Although there is an imbalance between gaming exports between China and South Korea, Jin doesn’t think it has significant meaning for Chinese developers. “South Korea is relatively small compared with other larger markets like Southeast Asia and North America. Most Chinese gaming companies just take it as a small part of their globalization plan.”

For some Korean companies, they are trying to find a way out by adopting detouring mechanisms. “Even before the blockage, it’s difficult for a Korean game to get a license in China. To facilitate the process, we reached an alliance with local partners and run our titles under their names,” said Park Jong Chae, director of Mobile Gaming Department at Korean gaming company NHNST.

“Now, it’s a path through which South Korean game developers can introduce their products to a Chinese audience. Its a grey area, but it’s the most common way and many companies are doing it. There’s a way around so you don’t have to say it’s impossible. Even when the licensing ban is gone, it’s crucial for Korean companies to find a trustworthy local partner who could help them to better understand the market,” he said.

Different parties in the gaming industry are making their own efforts.

“We have invited gaming companies from all around the world. Lots of them come from China. Although the ban is still in place, we hope this conference can help the cooperation between Chinese and South Korean gaming industries to move towards a positive direction,” a representative from the organizer of Playx4 told TechNode.

The decade from 1990 to 1999 marks an important part in China’s history. China’s “Open-door policy” from 1986 to 1990 brought a market economy and the private sector. Many of the post-90s generation (九零后, those born in the 90s)—having been born after much of the recent upheaval and a time when the country had long been accustomed to the one-child policy—have grown into open-minded and confident young adults.

“Post-90s grew up under a stable political environment and enjoyed the fast-growing economy of China. They have not experienced any major social change, unlike the previous post-70s and post-80s. Therefore, this generation is very confident,” Tony Park, the Managing Partner of LB Investment China told TechNode.

Post-90s kids are known to be tech-savvy, as they were the first generation to access the internet starting from childhood. The post-90s’ average age of first internet experience is 7.53 years and the daily usage time is 11.45 hours per person on average in 2014, according to Baidu. They account for 26% of China internet users in 2015 according to CITIC data.

They also became the main consumers of Alibaba’s e-commerce platform Taobao and Tmall; 86.8% post-90s shop online to reduce the cost of clothes and bags. A report from Tmall Global and CBNData show that young buyers (defined as those born after 1988) now account for nearly half of all consumption on Tmall Global.

Now the eldest of post-90s generation, people born in 1990 are 28 years and have already started their career; some have even started their own businesses. There are many successful post-90s founders: Dai Wei, founder and CEO of Ofo, the bike rental company that expanded to three continents. Nie Yunchen, founder and CEO of Heekcaa, a flavored tea company that quickly expanded to main cities in China. Li Jing, 25 years old, is Baidu’s youngest-ever vice president.

We interviewed three post-90s generation founders in Shanghai to see how they are disrupting the traditional market with their own fresh and creative ideas.

Challenging foreign brands in China

Jiang Jun, the founder of gamer glasses brand Zedot, used to play Tencent’s top-grossing game Honour of Kings ten hours every day, for two months whole months. He began to notice that his eyes were inflamed and irritated, but glasses that filter blue light helped to alleviate these symptoms. He found a lot of different brands that do this, but they were mainly from Germany, US, and Japan. He was surprised to find that the design of these glasses wasn’t very pleasing.

“How can those glasses make a good-looking guy like me to an ugly guy? I just couldn’t stand it. I thought I can make surely better design than that one,” Jiang Jun, CEO of Zedot told TechNode.

Jiang Jun hails from a family that has run a glasses business for 20 years, and he knew the industry very well. Jun, a Shanghainese, is from an affluent family and as a market planner at China’s leading media Diyi Caijing (第一财经), had a monthly salary of RMB 20,000 ($3,010). Jun’s six Shanghainese friends, who later joined him, also gave up their monthly salary of up to RMB 30,000 ($4,516) to join the company. Except for one, they are all post-90s.

“If you are Shanghainese, generally speaking, you have a house, you have a car, and your conditions are not so bad. You’re stable, but you don’t want to work for somebody, and you want some achievement,” Jun remarks.

Targeting the gaming market, the team aimed to develop gamer glasses that alleviate digital eyestrain. Yet, Jun wanted an all-new design and wanted a designer who had no knowledge of glasses to take part in the design.

Jiang Jun found a designer who won a Reddot design award to come up with Zedot’s design. Their glasses have a small space near the lens that holds water so gamers can keep their eyes moist during long sessions.

The market is big. There are nearly 560 million gamers in China and 36% of them spend money on games, according to Newzoo’s 2016 data.

To sell glasses for RMB 399, Jiang is collaborating with gaming platforms in two ways. First, he started a top-tier computer supply distributor Taidu, known for their futuristic computer equipment. Taidu is the exclusive distributor, allowing Jian to focus on product development. Second, he found marketing channels such as gaming and game live streaming companies to raise awareness of the glasses and their benefits.

“Right now it’s mostly international brands controlling the Chinese consumer market, and there are not many Chinese brand products,” Jun said. “I want to encourage more Chinese people to start their company in any sector, from the internet to food and beverage. Any traditional business needs post-90s generation’s new way of thinking.”

Jun also gave advice to those who are currently working in a company and getting ready to start their own business on the side, just like him.

“To be a good founder, you should be a good boss and co-worker in your current company, then you start your thing. If you are not doing a good job in your current company, and start your business, then there will be a lot of problems,” Jiang Jun says. “There is a Chinese saying ‘If you cannot organize your home, how can you go and think about the rest of the world (一屋不扫，何以扫天下)’. If your co-workers and boss all like you and respect you, then you can go start, because in that network, there is a lot of opportunities and they can support you.”

Challenging materialism over experience

Can you imagine Chinese tourists spending more than $10,000 overseas, just to have military training for three days?  This is serious business for a startup founded by 27-year old Prescilla Li.

“Chinese travelers are experiencing a shortage of travel destinations. Apart from polar expeditions, traveling overseas by car, and purchasing artworks in Europe, what can you imagine?” Prescilla Li, CEO and co-founder of The Global Extreme Players Club says.

Started in August in 2015, The Global Extreme Players Club is a travel startup specializing in extreme sports and military experience at sea, air, and land. Their customers are willing to pay $10,000 and above to spend on trips, ranging from 3 days to 3 months, to try out global military experience, hunting, extreme sports and flights to test their courage and try their limits.

She says that her customers range from post-90s to older, mostly coming with friends, sometimes with their family members. And these aren’t the types that boast on WeChat moments, preferring to share with their inner circle instead. They include investors and high-net-worth entrepreneurs from China. Now the most trending spot is Russia and Ukraine, and where their clients ride tanks, planes, and submarines.

“Chinese people do have kind of ideal thoughts and longing for military culture,” Prescilla notes. “We had a young entrepreneur client who could not face life after going through family’s misfortune. We took him on one of our trips and every day we see him changing until he had a major breakthrough. When we face the thorny situation, we are no longer pessimistic, and this inspires us.”

Born in Beijing, Prescilla Li was a normal travel tour guide, and she used to lead her guests to go golfing, fishing and sightseeing. As she kept doing the job for two years, she found that her customers had special needs more something more adventurous.

After traveling more than 20 countries and longtime contemplation of starting her business, Prescilla and her co-founder, who also loved extreme sports, decided to start the club.

“Our first destination was Mexico. When we set up new operations, we first conduct surveys with local people to ask what they think is the most valuable adventure they can do. Then we approach the local military. After signing a contract with the local military, they receive the first group,” she says.

The Chinese company signed a service agency partners with a French company and currently, French tourists are also using their resources to enjoy the same experience.

Challenging male dominance

The number of Chinese returning after getting their degree (海归, haigui, a play on the word for sea turtle) is increasing rapidly. According to Ministry of Education, there were 2.5 million Chinese students who had studied abroad coming back to China. 76.4% of haigui started their business in China from 2015.

After getting a double degree in mathematics and statistics from the University of Toronto, Angela Wang came back to China and co-founded Micro Capital, a cross-border venture capital platform investing and supporting the pioneering projects in big data and its verticals. With outstanding investment performance, including Wuxi Bing Jian Technology, they made 6x ROI.

“We made a huge financial return. But, helping entrepreneurs was not enough for me. I loved and admired entrepreneurs so much that I wanted to become one of them. So I decided to start a startup myself,” Angela Wang, CFO and founder of RiverPay told TechNode.

Passionate about numbers, she found a market in North American overseas merchants. With the number of Chinese tourists to the United States increasing every year, overseas merchants need to offer Chinese mobile payment options. A whopping 2.97 million Chinese tourists traveled to the US in 2016, spending a total of $33 billion, according to a report compiled by the National Travel and Tourism Office (NTTO).

“North America’s payment lags far behind that of the cashless society in China. Our target was a North American company that has Chinese as their main consumer base, who had pain points of providing Chinese mobile payment options,” Angela said.

“Being a VC is easy, you don’t have to try cold calls. The good companies come to you. Being a VC is not good for young people. You shouldn’t find comfort when you’re young, you should find discomfort,” Angela says. “Starting a company is a much harder job than doing VC, because it’s actually making a change and you are making things happen. It’s more challenging but more interesting.”

RiverPay slowly expanded to different cities in US and Canada and is currently cooperating with thousands of high-end merchants in North America, including Holt Renfrew, one of the largest luxury chain stores in the world, Harry Rosen, Canada’s top-end menswear, and hundreds of other well-known boutiques including Tiffany, Van Cleef & Arpels, Chloe, Balenciaga, Givenchy, Porsche, BMW, and UPS. The company is currently profitable by charging service fees to businesses that use their Alipay and WeChatPay payment solutions.

“We hire business development teams in more than 20 cities, including LA, New York 5th Avenue, Toronto, Vancouver, Saipan, Las Vegas and Hawaii,” Angela says.

The fintech company’s strength lies in their self-developed cash register integration technology that can quickly dock with dozens of mainstream business ERP system and is currently patent pending. To offer Chinese mobile payment options in the region, RiverPay follows compliance requirements from U.S. and Canada regulators, as well as the payment networks including Alipay and WeChatPay. They also formed their own big data industry chain, to provide precision marketing services to North American businesses.

“We hope that in the next five years, we will thoroughly subvert the payment industry in North America and transform the status quo of Chinese cross-border payments. In the past when we talk about technology, we used to say ‘Copy from USA’. Now we are doing ‘Copy from China’,” Angela added.

The female co-founder also wants to change the trend of male entrepreneurs dominating the fintech and investment business arena.

“We need more female CEO leadership in fintech and VC. It’s currently 80% male dominant. We need more woman. Male has the tendency to be logical, while female is more attentive to details. Female executives are more likely to pay attention to employee’s emotions, and put importance on human-oriented rather than working-oriented atmosphere,” she says.

Post-90s will be the driving force of China’s future

Brought up in a more affluent environment than their previous generations, post-90s come with new consumer’s view, seeking more value in product and service, such as better design, new experience, and convenience. They also had working experience in the traditional industry and wanted to shake up the status quo in their own lives and in the market.

The post-90s in China are expected to reach 31.3% by 2050 according to data from the United Nations, meaning that post-90s will be the driving force of China’s future development and consumption. Keep your eye on this generation, and get ready to be challenged by them, as they might be relevant for your future customer or your future employee or even your future boss.

Tencent is reportedly advancing talks with Mumbai-based fantasy sports platform Dream 11 on an estimated 100 million investment, according to Economic Times reports.

A source familiar with the deal said transaction details provided by Tencent estimate Dream 11’s valuation at $400 to 450 million.

If successful, the deal could potentially change India’s growing gaming industry. The investment in Dream 11 would be the second major deal Tencent closed in India in the past two months. In February, the Chinese internet giant agreed to lead a $115 million investment in music streaming service Gaana.

China’s tech giants including the BAT (Baidu, Alibaba, and Tencent) have been eyeing opportunities in the world’s third-largest economy. As China’s largest game publisher, Tencent, in particular, has expressed interest in investing in the gaming market and scouting for up-and-coming startups.

These resourceful Chinese tech firms have been pouring capital into the Indian market and their money is deciding who the top players in tech are going to be. Indian companies backed by the Chinese have access to extensive funds and resources that allow them to put smaller players out of business.

Alibaba is keen on cashing in the world’s biggest market for video games—China. The company has signed a deal with Japanese Hit Point, the company behind Travel Frog and Neko Atsume: Kitty Collector. Alibaba will receive exclusive distribution rights in Mainland China for Travel Frog, the mobile phone game that has become a surprise hit among Chinese players.

Alibaba is serious about challenging Tencent and NetEase in the gaming arena and Travel Frog is another step in that direction. The company formally established its video games division after it bought online games firm EJoy founded by former NetEase COO Zhan Zhonghui. Zhang joined Alibaba’s new gaming unit along with Chen Wei’an, EJoy’s product operation manager for World of Warcraft and Starcraft 2, and Wu Yunyang, who led development on Journey to the West 2 and Fantasy Westward Journey.

Read more: A mobile game about a traveling frog becomes surprise hit in China

Although Travel Frog did not have a Chinese version until now, the iOS version of the game has been downloaded more than 30 million times, TechNode’s Chinse sister site reports. The game is so popular in China there are now low-quality copycat games appearing in the App Store. A large portion of its fans are China’s female mobile phone gamers whose numbers have risen sharply over the last year to 367 million, according to the newest report from Jiguang.

The Chinese version of Travel Frog (aka Tabikaeru) will add more landscape animations inspired by Chinese culture, Hit Point has revealed to media earlier. Hit Point also plans to continue its cooperation with Alibaba.

Prestigious Peking University has opened a new course of studies in gaming this semester called 电子游戏通论 “The General Theory of Video Games” (our translation) according to The Beijing News.

“This is not a training course for gaming competitions, rather, it touches upon the important topics including R&D, the technology, the gaming industry, the media, and the psychological aspects of gaming,” the course instructor, Chen Jiang, told The Beijing News reporter. Chen said the purpose of the course is not to defy or challenge academic conventions but to focus on the implications and problems in the rapidly developing gaming industry in China. Due to the recent boom of the gaming market, the industry has been attracting a lot of talent, Chen said, a lot of the students will likely join or become investors in the gaming industry when they graduate, so it is important to bring the conversation to the table.

The course has seen overwhelming popularity and had to open up new spots for more students. Chen said the course will invite industry experts and mentors to speak and will allow students to observe at professional gaming competitions up close.

China has one of the largest gamer-bases in the world, and it gaming craze is shared across all ages and genders. According to recent reports, females now make up 34.6% of China’s gaming community. Gaming streaming platforms, professional e-sports (video game competitions), PC and mobile video games have all been propelled by the country’s booming gaming market, which was estimated to register $27.5 billion in sales last year. Game developers like Tencent and NetEase, and other tech giants such as Alibaba, are all competing in the space. In 2016, China’s Tencent has become the world’s largest gaming company by revenue.

Chinese live-streaming platform Huya (虎牙) yesterday announced that it has pocketed $461.6 million in its series B financing round led by Tencent, marking Tencent’s second major investment in the live-streaming sector within one day after it revealed an RMB 4 billion ($630 million) investment in game streaming platform Douyu (斗鱼).

Huya’s financing round was completed yesterday. After the completion of the transaction, YY, the parent firm of Huya, maintains control over Huya. However, Tencent has also obtained the right, exercisable between the second and third anniversary of the deal’s closing date, to purchase additional Huya shares at fair market price to reach 50.1% of the voting power in Huya.

Huya has also announced plans to file for US IPO and has submitted a draft registration statement on a confidential basis to the US Securities and Exchange Committee for a possible listing in the US market.

Read More: The quiet rise of China’s $3 billion e-sports market

“We are very excited about Huya’s completion of series B equity financing from Tencent,” said David Xueling Li, Chairman and acting Chief Executive Officer of YY, in a press release. “Supported by Tencent’s strong capabilities in game development, distribution and operation, Huya will march into a new era of building and maintaining the largest game live streaming and e-sports community for young generations in China. Meanwhile, Huya remains a major asset of YY, continuously bringing significant value for YY shareholders,” he said.

It’s worth noting that Tencent is making efforts to establish influence in the live streaming sector in China. Tencent has poured money in Douyu for three times. It led a $100 million series B financing round in Douyu with Sequoia and Nanshan Capital in March 2016. Tencent has also in Douyu’s series C financing round worth RMB 1.5 billion ($236.5 million) in August 2016.

Before the heat surrounding its latest viral game Tiao Yi Tiao cools off, WeChat released Saturday an updated version of the game by integrating more social and interactive features.

Despite social components, including scoreboards and rankings, the original game was a standalone experience with no interaction with other players. The new version, however, allows two to ten players to compete directly.

After inviting WeChat friends, players take turns making their jumps. Failed jumpers only to get watch others play. The principle is the same, however, from the single player: the more successful hops you make, the higher your name will be on a leaderboard. In addition, more WeChat and Chinese-themed visual graphics ahave integrated.

Since its launch in late December last year, the download-free game has become an instant hit among Chinese users with a daily active user of 100 million. Given what the hongbao feature has achieved during previous Spring Festivals, WeChat has reasons to expect another spike of the game during the upcoming holiday.

In addition to the feature what could spice up our leisure lives, WeChat made an update that overjoyed millions of online marketers by allowing them to edit the typos in postings on WeChat official account, the default tool for making online marketing campaigns in China.

However, WeChat still won’t allow a free-for-all. Each post can be only edited once for up to five changes, be it Chinese characters, English words, figures, punctuation, or spaces. Edits in feature images and abstracts are still unavailable.

As for why only five changes are allowed, Tencent responded, “We want to make sure that the official account managers are really serious about each and every one of their postings. To be responsible for and provide the best reading experiences to their audiences. Less than five changes could guarantee a consistent reading before and after the edits. We will continue to improve and optimize based on user feedback.”

WeChat’s tightening regulation of contents spread to its official account management policy. In a statement made Saturday, the company downsized the numbers of official accounts each entity could register. Individuals can register up to two accounts, down from five, while organization users recorded a more drastic change from 50 to only five official accounts.

Although the platform does make exceptions for these limits, applicants have to go through a longer process to apply for the approvals from WeChat platform and then from relevant authorities.

Tencent announced today that early access to PlayerUnknown’s Battlegrounds: Battlefield (绝地求生：刺激战场) will be available tomorrow (in Chinese). Battlefield is the mobile IP of PUBG made by Chinese game developer Lightspeed and Quantum Studios. The registration for early access of Battlefield opened in December and has attracted over 18 million players to register.

Battlefield is one of two versions of PUBG (in Chinese) of the much-anticipated video game that will be released this year. The other version of the game, Army Attack (绝地求生：全军出击) developed by TIMI Studio, already launched its early access the end of last month. Battlefield features the last-man-standing gameplay, while Army Attack focuses on naval warfare and helicopter fights.

Tencent also got diehard PUBG fans excited when it teased the Battlefield poster with the tagline: “Mysterious Training Officer.” It is rumored that local celebrities including Peng Yu-Yan, Wu Jing, Jay Chou are being considered as spokespeople for the wildly popular video game.

The PC version of PUBG was developed and published by PUBG Corporation, the subsidiary of the Korean publisher Bluehole. The beta version was first released for Microsoft Windows in March 2017, the full release was available in December. The video game quickly became one of the most popular survival shooter games out there and has sold over 20 million copies since the beta launch. The partnership with Tencent, the Chinese entertainment behemoth, has already pushed out a number of smash success including Honour of Kings.

The months leading up to the early access release weren’t trouble-free, however. In October, the Chinese government attempted to ban PUBG (in Chinese) due to the bloody, violent nature of the content. In response, Tencent promised to “make adjustments to content and make sure they accord with socialist core values, Chinese traditional culture, and moral rules.”

The video game already caused a big fuss even before it comes to China. In January, Tencent enlisted Chinese police to root out the cheaters and hackers who help design and sell cheat software that gives some players unfair advantages such as the ability to see through walls. At least 120 people were arrested.

E-sports, or competitive video gaming, is quietly on the rise in China. We visited a training spot of KillerAngel, an all-female e-sports club, in Shanghai to find out how gamer girls are professionally trained.

If you can’t see anything, try QQ video instead.

This is how e-sports teams are trained in China. The clubs usually rent houses on the outskirts of metropolitan areas, where professional players live together to focus on their training. Often times before a tournament, coaches and managers would arrange “friendly” matches with the other listed teams—to spy on each other.

KillerAngel (KA, 杀戮天使 in Chinese) Women’s E-sports Club is one of the best professional teams in China. Just before Christmas, the six-woman team, who were top players in League of Legends, pocketed the championship of 2017 NTF Women’s Super League in China.

Read also: The quiet rise of China’s $3 billion e-sports market

“With more young girls becoming professional (e-sports) players, nurturing the young talent is fulfilling for me,” said Nini, a former professional gamer on KillerAngel. She currently works as the team’s manager.

Valued at $3 billion in 2016, China’s e-sports market is expected to hit 220 million spectators by the end of 2017. To put that into perspective, one in every six people in the country will have watched e-sports matches and have some understanding of the matter.

China’s leading internet portal and gaming company NetEase saw its shares drop by 3.23% on NASDAQ (in Chinese) on Thursday US time after Xinhua reported that the government plans to clean up “illegal” and “inappropriate” online games.

China’s publicity department, cyberspace management department and other relevant ministries jointly released a statement (in Chinese) on Thursday outlining the government’s plan to regulate explicit and inappropriate online games. The statement specified that it is targeting games with large numbers of players which have significant social influence. The statement also said that the government will strictly ban games that contain illegal content from going abroad.

NetEase and Tencent are the companies that are most likely to be affected by the newly released guidelines. During the first three quarters of 2017, Tencent’s online gaming arm pocketed RMB 73.52 billion (roughly $11.28 billion) in revenue while revenues for the entire year are expected to exceed RMB 100 billion ($15.34 billion). For the first half of 2017, NetEase’s net profit reached RMB 6.89 billion ($1.05 billion). Tencent and NetEase are undoubtedly the two major players in China’s online gaming market, holding up 49% and 18% of the market share respectively, according to a report from GPC.

The state’s move may also get in the way of Tencent’s smash-hit game Honour of Kings. The game reportedly has over 100 million daily active users, and was criticized by state media earlier this year for “spreading negative energy.” The game, also known as Kings of Glory and Strike of Kings, has already debuted in Europe and is now available in the US under the name Arena of Valor.

Like the mobile payment industry, China’s gaming market is a highly cleaned-up field, where Tencent and NetEase take a dominating 70% of the market. Instead of diving into the competitive market, increasing domestic internet companies are turning their sights to Southeast Asia (SEA), a relatively untapped region that not only shares a similar culture with China but also has more relaxed control from the governments.

A recent report from market research firm Niko Partners further demonstrates the potential of this area by giving impressive projections for the market size. The combined PC online and mobile games revenue in SEA is projected to reach $2.2 billion in 2017, rising to $4.4 billion by 2021, the report pointed out. This forecast has been revised upward from last year, based on the strength of e-sports and new hit international games entering the SEA market.

The number of PC online and mobile gamers in SEA is projected to reach 300 million by the end of 2017, rising to more than 400 million by 2021.

Like elsewhere in the world, mobile games are recording a strong uptick in revenue, expecting to surpass PC games revenue in 2018. However, mobile games revenue is additive, not cannibalizing, PC games usage, the report added.

In the wake of globalization initiative of Chinese tech giants, several domestic companies have been accelerating their layout in the SEA region, including Alibaba Games, Perfect World, LineKong, and more.

Tencent has already established a foothold in the region with investment in Sea Limited, (formerly known as Garena) a leader in SEA for PC and mobile games operations and distribution. The company went public on last month in the US, raising $884 million in the IPO.

“E-sports has had a huge impact on the Southeast Asia region and is the primary driver for the explosive growth in PC online games. The heavy growth of the MOBA genre is a major contributor to mobile e-sports as well,” said Lisa Cosmas Hanson, managing partner of Niko Partners.

Chinese media regulators announced on Friday that PlayerUnknown’s Battlegrounds (PUBG), the world’s most popular computer game of the moment, will probably not receive a publishing license in China. Soon after, however, China’s smartphone giant Xiaomi held a launch event for a new PUBG-like feature for their mobile game Xiaomi Guns (小米枪战).

The problem with PUBG, according to the State Administration of Press, Publication, Radio, Film, and Television (SARFT), is that it’s too bloody and too violent (in Chinese). “Similar to ancient Rome’s gladiator battles, it severely deviates from China’s core socialist values, as well as Chinese traditions and morality, thus leaving a negative impact on the mind-body health of teenage consumers,” the body’s statement said. As such Chinese media regulators advise gaming companies to avoid developing games or related products such as live streaming platforms or e-sports which carry that ideology.

Published by South Korea’s Bluehold Inc., PUBG’s concept is similar to the young-adult dystopian fiction The Hunger Games, in which players are stranded on a remote island where they were told to scavenge for weapons and kill other players to win. The game has sold nearly 18 million copies globally since its release in March as of this writing, according to data from SteamStats, the data service for online PC gaming platform Steam.

Although PUBG doesn’t currently have a local publisher in China, 41.62% of its players have come from China—the largest player base—by October 17th. Meanwhile, Chinese players have complained about high server lag as Bluehole struggles to deal with the influx. Tencent, China’s social media giant who is also a top gaming publisher globally, was in discussion to purchase PUBG’s licensing rights in China.

Eyeing PUBG’s massive success, Chinese publishers have flocked to make PUBG-like games, one of which is Xiaomi Guns. The game did not have a PUBG experience until October 18, when Xiaomi’s founder and CEO Lei Jun announced the soon-to-come popular feature through his Weibo account. The launch event on Monday signals that Xiaomi has gotten a nod from the content regulators, a Chinese PUBG expert told TechNode. They prefer to remain anonymous.

“It’s not impossible for PUBG-like games to get government approval down the road, if they modify the content according to the official rules, or if they have close ties with the content regulators,” the expert added. “The reason why Xiaomi Guns is able to release the PUBG feature is likely because the game was approved before carrying the now controversial feature.”

Nasdaq-listed NetEase, the second largest gaming publisher after Tencent in China, issued a notice (in Chinese) on Monday that it will adjust its content in accordance with the government rulings over PUBG-like games as soon as possible. NetEase was the major force in helping to get World of Warcraft back online in China in 2010 by taking “necessary corrective measures” to address the government’s issue with the monster-fighting game.

The long-awaited Apple event has come to an end, offering the world some pretty cool tech. But while most of the world is still savoring Apple’s latest hardware updates, we can’t overlook the increasingly important roles that Chinese gaming companies are playing in Apple’s—or even the world’s—content ecosystem.

Even a company as great as Apple can’t do it all and can only focus on the things it’s good at. Therefore, it’s a common practice for Apple to invite content partners to demo their products at the mega launch event and share their experiences about how Apple’s latest software and hardware updates can enable greater user experiences.

At today’s release, two gaming companies were honored to pitch onstage at Steve Jobs Theater. They are either coming from China or founded by Chinese entrepreneurs. Here’s a quick wrap-up of their demos.

Sky by Thatgamecompany

Thatgamecompany’s newly launched title Sky is a romantic social adventure game, which features its signature artistic designs that could be commonly found in previous works. Light and dark are important themes of the game. Playing as children of the light, the player’s goal is to bring light to where it is needed the most while flying above the clouds to explore the wonders of the mysterious world, introduced Jenova Chen, the company’s CEO. With the aim to be easy for casual players to pick up, the control is simple and intuitive. Social is another important factor in the title, allowing up to eight players from the world to play together.

Thatgamecompany should be a fairly familiar name to hard-core indie game players. The studio is engaged in creating video games that provoke emotional responses from players. Its video games include the award-winning Flash title Flow, Flower, and Journey. Originally coming from Shanghai and now working in the US, the company’s co-founder and creative director Jenova Chen tries to make games that tap into feelings that are universal and independent of culture.

The Machines – by Directive Games

Shanghai-based VR/AR game developer Directive Games demoed The Machines, one of the world’s first competitive multiplayer games designed to be played entirely in augmented reality, at Apple’s iPhone keynote today. In the game, players can battle their friends in real time, playing the rebels against the dominators. The gamers are able to play in any new angle and to point-and-shoot an iPhone to create the battlefield. Sound added another layer to the immersive experience. As players leaned into the battle, the volume would increase.

With core-team from Ice Land, Directive Games is now headquartered in Shanghai with offices in Reykjavík and Hong Kong. The firm was being recruited in Vive X, HTC VIVE VR accelerator program last year. TechNode got a chance to talk with the team on VR landscape early this year.

Gaming from China

Witnessing Chinese game companies forming a rising force in the world is, by all means, an exciting phenomenon for us who are following local tech scene, but it’s not quite a surprise: the country has already overtaken the US as the gaming capital of the world in terms of market size. The 600 million Chinese gamers have contributed $24.6 billion of the industry’s $101.1 billion global market value in 2016, just ahead of the US’s $24.1 billion, a report from venture capital firm Atomico shows.

Where there’s high demand for gaming content, there will be more quality content providers and a mature ecosystem surrounding the industry. In Directive Game’s case, the fact that an Icelandic team moved all the way around to set up a company in China speaks to the traction that China has gotten for gaming companies, especially in the VR/AR field.

Apart from gaming startups, Tencent has already marked a milestone for China’s gaming developers with its mega-hit Honour of Kings. The title has become the world’s top grossing game earlier this year.

This week Matt and John talk with Daniel Ahmad, an analyst at Niko Partners about:

• The uniqueness of China’s games market
• The size of the e-sports industry
• How gaming and e-sports are becoming more mainstream
• Tencent’s position in the games market
• The role of Honour of Kings
• Future prospects for gaming and e-sports in China

Links

• 2017 China e-sports market report
• 2017 China digital games market report
• Rita Liao: The quiet rise of China’s $3 billion e-sports market
• Sheila Yu: Tencent doubles down on e-sports with e-sports industrial park
• Sheila Yu: What Panda TV’s 1 bln RMB series B means for e-sports and live streaming
• Sheily Yu: Pop singer Jay Chou opens internet cafe brand aimed at e-sports
• Daniel on Twitter
• How to leave an iTunes review

• John Artman, @knowsnothing, TechNode
• Matthew Brennan, @MattyBGoooner, ChinaChannel

• iTunes
• RSS feed
• Music: “Theme from Penguins on Parade” by Lee Rosevere, Music for Podcasts 3

Check out this episode!

While China marked the 90^th anniversary of People’s Liberation Army (PLA) in late July with a military parade, the country’s netizens are celebrating the event in their own way by flooding the top social media platforms with PLA uniform portraits. Scanning a QR code and uploading a headshot photo, then a composite self-portrait is ready for you to attract tens of “likes” from friends. The trick went viral quickly with page views for the program spiking to 800 million in two days.

The incident has brought the technology behind the program—HTML5—back to the spotlight. Born to high expectations, the technology has run into headwinds due to performance and compatibility issues. But with the development of technology and changing market conditions, it is ready to record a real boom, according to Wen Xiangdong, VP of Egret Technology.

Several market shifts have shed brighter prospects on the technology. At the end of last year, Facebook rolled out Instant Games, a new HTML5-enabled cross-platform gaming experience, on Messenger and Facebook News Feed. On top of that, Adobe announced plans to cease support for Flash by the end of 2020, giving opportunities for more modern open web standards like HTML5 to fill in the gap.

Beijing-based Egret Technology, founded in 2014, offers HTML5 mobile solution and services for games and application professionals. It provides various solutions for HTML5 game studios and developers, including game engine Egret Engine, Egret Runtime, an accelerator used to speed up content by embedding in mobile browsers and applications, and smart GUI editor Egret Wing.

As an early entrant to the industry, Egret Engine is used by over 70% of H5 game developers, according to the firm. A total of 200k users developed more than 8,000 H5 games based on their services.

The company went public last year on China’s National Equities Exchange and Quotations market. As a technology-driven company, Egret’s game engine services are mostly offered for free, according to Wen. The company’s revenues come from game distribution, homegrown game development business and open platform that provides SDK services to game developers, he added.

The twists and turns of a maturing industry

“H5 game is often dubbed the ‘web game for mobile.’ But compared with mobile games, which recorded touch-and-go success in China, H5 gaming has experienced a roller-coster journey over a prolonged period. We are in the industry long enough to experience all the down moments, but luckily the whole market is on the right track to a gradual rise,” noted Wen.

Although Egret Engine-based H5 games like Catch The Crazy Cat became a hit on WeChat as early as 2014, they are mostly casual games with simple gameplay. User passions soon faded away and the lack of a commercialization model made them less sustainable.

The recent surge in China’s H5 gaming started from the beginning of last year as more diversified gaming categories emerged. Along with the rise of mid- and hard-core games like SLG (simulation game) and ARPG (action role playing game), the industry recorded another comeback with benchmark games. The H5 version of Shanda’s blockbuster game The World of Legend hit monthly gross revenue of 30 million at the end of last year through ads or in-game purchases.

“For me, diversification in game categories is a key factor in determining the maturity and prospects of a market. Like many other sectors, H5 gaming went through the same development process from having no direction to flocking to one hot sector and then to diversification. H5 gaming is now heading towards diversification and maturing,” Wen said.

The change is being propelled forward by several factors, according to Wen. Firstly, Chinese gamers or Chinese netizens, in general, are more willing to spend money on in-app features. Secondly, large platforms like WeChat, Weibo, QQ, Toutiao are opening their traffic to H5 games. Removing the hassle of downloading an app, H5 games give people a conversation starter or something to do while they wait, both of which click with the social nature of various social media platforms. This is partially facilitated by the openness of H5 technology—which provides one unified way to supply various kinds of games—and removes the problems of re-adapting the programs to different platforms.

Gaming powers from China to the world

After years of neglect, the global H5 gaming market is also warming up, marked by Facebook’s release of Instant Game feature. Against this backdrop, Chinese H5 gaming firms, which have witnessed several successful cases domestically, are poised to take their experiences to the global market.

“Currently, Egret’s overseas users mainly come from Japan, South Korea and Russia. We are trying to expand to more countries in Southeast Aisa and North America. In addition to Facebook, other overseas social platforms like Line and Kakao are also adopting an open attitude towards H5 games,” Wen pointed out.

It seems that Egret is not the only Chinese company that eyes the rising sector. Chukong, the mobile gaming company that stands behind the prevailing Cocos Game Engine, is moving fast to tap the global H5 market with launch of their own title for Facebook Instant Game.

When being asked about rivalry from peers, Wen said: “For an emerging market like H5, cooperation with the few players to build up the market is more important than competition.”

Since the closing of the 2008 Olympic Games, the hulking, awe-inspiring Bird’s Nest has become a new landmark for Beijing. This November, the 90,000-seat stadium will be hosting the 2017 world championship of League of Legends, one of the most popular online video games in history, marking the first time for China to host this prestigious e-sports competition.

Competitive video gaming, known as e-sports, have been taking off all over the world. Each year tens of thousands of fans fill giant stadiums to cheer on their favorite professional players. A bigger crowd—43 million viewers in the case of League of Legends 2016 Final—watch via live stream at home or internet cafes. In China, where the state media has slammed the world’s top grossing mobile game Honour of Kings for its “poison” effect, it seems absurd that a video game competition would make it into the arena for national pride.

The Chinese government’s attitude toward e-sports has long been ambivalent. As early as 2003, China led the world to become one of the first countries to recognize e-sports as an official sports program (in Chinese). Shortly after the encouraging news, however, the main media regulatory body, State Administration of Press, Publication, Radio, Film and Television (SAPPRFT), banned the broadcast of video gaming programs on TV, long popular in neighboring South Korea. E-sports quieted down in China before its growing economic returns became too hard to ignore. A recent report by Penguin Intelligence and China Tech Insights (CTI) shows a surge of 170 million new fans came into China’s e-sports market in just 2016, thanks in part to an increased penetration of smartphones and Tencent’s blockbuster title Honour of Kings.

Valued at $3 billion in 2016, the e-sports market in China is expected to hit 220 million audiences at the end of 2017, says the CTI e-sports report. That is, one in every six people in China will have watched e-sports and have a certain level of understanding of the matter. When the Chinese Dota 2 team Wings Gaming won The International 2016 (T16) and took home a record-breaking $9 million prize, e-sports became a point of national pride. State organs, including the Communist Youth League of China, CCTV, and People’s Daily, all congratulated the victory.

“E-sports didn’t really take off in China until League of Legends became popular here,” says Shirley Wang, who works for the China e-sports department of Riot Games, the maker behind the popular title.

In the past few years, government-funded e-sports towns have mushroomed across the country in lower-tier cities like Chengdu, Xi’an, and Guiyang. Local officials hope that the lucrative new industry would create the same GDP miracle as it did for South Korea following the 1997 Asian financial crisis. That, in part, may be because people outside of China’s big cities tend to consume more e-sports: 41% of e-sports fans live in 2nd tier cities, followed by 17% in 3rd tier cities, says the CTI e-sports report.

Yinchuan, an oasis in the northwestern Chinese hinterland, is one of the cities chasing the e-sports dream. When the Korean-born tournament World Cyber Games (WCG)—widely regarded as the Olympics of video gaming—announced its closure in 2014, the Chinese city of 2 million people said they would carry the torch. The event was renamed to World Cyber Arena (WCA) and officially launched at the solemn Great Hall of the People in Beijing.

“Why have we brought [WCA] to the remote west? Las Vegas started to promote casino gambling in the 30s because it was going through a recession,” says Mayor of Yinchuan Guo Bochun (in Chinese). “And it was government policy that has led to Las Vegas’ prosperity today.”

Businesses have also spotted the promise in sponsoring e-sports, a market with a highly sticky user base ready to pay. More than half of the audience watch more than one hour of e-sports online for each session, and 34.1% of them are willing to pay to watch the competitions on-site, the CTI report shows. Tencent, the Chinese social media and gaming giant who derived 46% of its 2016 revenue from online video gaming, signed an agreement in May with the eastern city of Wuhu to build an e-sports town. Alisports, the sports arm of the e-commerce behemoth Alibaba, announced last March a $5.5 prize pool (in Chinese) to kickstart the World Electronic Sports Games.

“My parents support my dream of becoming a professional gamer,” says Anqing, a 19-year old who left Hong Kong and came north to join KA, an all-female e-sports club in Shanghai. “Because they know I can make a living.”

But very few can climb to the stardom on par with Wings. According to KA’s team captain Nini, the better-paid e-sports gamers make about RMB 15,000 ($2,325) a month, with the lowest being a meager RMB 3,000. “You get aged out quickly too,” says the 28-year-old Shanghainese who was shy to reveal her age: 25 is the watershed year, after which one’s motor skills and reaction time will begin to decline. Nini said she was an oddball, not just in the cutthroat e-sports market but also socially.

“My relatives think I should get a proper job and get married at my age,” she shrugs. There remains a lot of ignorance from the older generation of video gaming, especially when it leads to concerns about addiction, violent acts, and even theft. To China’s younger generation, however, gaming is an essential part of their social identity. Another KA player says, growing up as the only child she didn’t have siblings to play with. Gaming is what glued her and her other only-child friends together. “You feel the peer pressure because everyone is playing.”

The government has also helped pushed the public to respect e-sports as a real sport. Last year, e-sports was officially added as a vocational education major. But the life of professional players is not all glamor; they must practice relentlessly. “We train six days a week from 1pm to 11 pm,” says Anqing. “Even during my time off I’s still practicing, because I want to get better.”

That craze and professionalism will continue to propel China’s e-sports development forward. “Our hope is that, whenever Chinese people think of e-sports, they will remember how e-sports tournaments have been held at the Bird’s Nest,” Johnson Yeh, who heads e-sports for Riot Games China said in an interview (in Chinese). “And how frenzied the fans are, how superior the production is.” People attending the event will no doubt remember that, but outside the stadium, the triumphant image and lucrative prospectives of e-sports will likely continue to be tempered by the lasting stigma of video gaming.

China’s biggest entertainment and video gaming conference, ChinaJoy, is under way in Shanghai. The fervor of Chinese gaming fans remains unshaken by the city’s scorching hot weather, and if anything is even more feverish since the event is celebrating its 15th anniversary this year.

There was a healthy dose of everything related to gaming at the carnival: the launch of big gaming titles, virtual reality, gaming payments, and of course, the booth babes who have become a large part of the conference’s charm.

HTC VIVE released a new VR game called Kai-Ri-Sei Million Arthur AR with Square Enix this Thursday. The game features HD boss battles and a card battle system that complements interaction in the VR space.

Intellectual property such as worlds and characters created by China’s online literature is paying off big for the entertainment market, creating opportunities for nearly every element  of the industry from TV dramas and film to gaming. The TV version of Chinese fantasy epic Eternal Love, based on stories written by online novelist Tang Qi, became an instant hit at the beginning of this year. The film and mobile game version followed a few months after the TV version was aired in an attempt to ride the wave. Driven by the trend, the mobile industry is stepping up. The drama and game version surrounding new elements of IP like Princess Agents (楚乔传) were released at the same time this month. Other Chinese IP following the same pattern are Love O2O (微微一笑很倾城) and Ghost Blows Out the Light (鬼吹灯).

In partnership with HTC Vive, Chongqing-based IVREAL demoed their MR technology at ChinaJoy. “We use a third-person view to combine the players and the virtual environment. Compared with first-person footage, the use of a new angle would be super helpful for developers to make a live demo and promote their content,” said Tao Shu, founder and CEO of IVREAL.

Although the VR boom is slowing down as reality sets in (no pun intended), VR booths promising physical activity still lured the most visitors at ChinaJoy. Instead of offering a VR headset alone, nearly all the manufacturers tried to offer more comprehensive experiences that using your whole body. Nined’s VR treadmill works in a similar way to a big baby bouncer, allowing gamers to walk, run, jump, crouch, and sit in their virtual worlds.

 Shanghai-based VR hardware and software company Hypereal released a bevy of new products including a camera positioning solution for 360° coverage, wireless cameras, VR arcade solutions, as well as VR painting tool Lindori.

We even spotted a few fintech service providers who want to capitalize on the rise of the global gaming market by providing cross-border payment settlement solutions for gamers.

Established in 2015 in Shanghai, iPayLinks is primarily involved with payment settlement solutions, mobile payments solutions, and development of e-payment technology for cross-border and domestic companies in e-commerce, travel and digital entertainment industries.

”Compared with payments in other industries, cross-border payment for the gaming industry is more fragmented, usually featuring payment through telecom carriers, local e-wallets, bank cards, prepaid cards, etc. We now primarily focus on the SEA market, which is usually the first stop for overseas expansions of game developers thanks to similar cultures,” Sales Vice President of iPayLinks told TechNode.

Last but not the least, here’s what everyone really comes to ChinaJoy for—the booth babes:

Intergalactic visual effects helped the movie Star Wars: The Force Awakens to impress audiences worldwide. What you may not know is that the movie team at Virtuos, a gaming company with studios in Shanghai, Chengdu, and Xi’an, played a part in generating the visuals of Star Wars as well as other several other blockbuster movies and AAA games.

Started in Shanghai in 2004 by former Ubisoft executive Gilles Langourieux, Virtuos’ forté is providing game development and 3D art production services to other gaming firms or film companies. It counts major titles such as Final Fantasy XII: The Zodiac Age, Assassin’s Creed: The Ezio Collection, and Horizon Zero Dawn amongst its portfolio.

Virtuos’ China connection

Virtuos founder and CEO Gilles Langourieux first came to China in 1997 as the General Manager for French gaming firm Ubisoft’s China operations. He remembers Ubisoft was particularly encouraged by the Chinese market after a trip to Jiaotong University.

“Visiting a classroom at Jiaotong University at the time, we could see that there were a lot of strong engineers [who were] very well trained,” Langourieux told TechNode. “But when you visit the computer room, they were all playing games. So we thought if we come here, we’re going to be the first to develop games for the world market and we’ll be able to attract a very strong demand.”

Within the first year of setting up shop, the Ubisoft China team had 100 people. After three years, that number grew to 300. Along with the fast growth, Ubisoft also became profitable very quickly. In 2000, Langourieux returned to France to oversee Ubisoft’s worldwide online operations.

He came to China for the second time in 2004. This time, it was because his wife was posted to China. Partly to support his wife’s move and partly to create a business of his own, Langourieux left Ubisoft and founded Virtuos in Shanghai.

Catering to niches

With his extensive experience in gaming, Langourieux decided to create a company that catered to niches instead of competing against other large incumbents. Virtuos helps other gaming companies recreate games for multiple consoles, thereby increasing their revenue. For example, Virtuos can help a client recreate a game designed for PlayStation 3, to be compatible with PlayStation 4. This way, gaming companies can continue to earn revenue on existing titles when new consoles are released.

The other service that Virtuos provides is 3D art production. Langourieux explained that other than the brand, beautiful art is the number one reason why people choose to play a game. So Virtuos’ team of artists help gaming companies make bigger and more beautiful games.

“If I had started a [conventional] game development company, my chance of becoming number one would have been relatively small,” Langourieux said. “I prefer to be number one in a small niche than to be very small in a much bigger [field].”

A dedication to art

Digital gaming straddles the fields of art and computer programming. Under Langourieux’s leadership, Virtuos is dedicated to providing quality art production. At its Shanghai studio, there is a sculpture and painting room where game artists are encouraged to go back to the basics of art and human anatomy whenever they are between projects.

“The idea for the sculpture and painting room came from a visit to EA Canada,” senior art director Wuwei explained to TechNode. He had also previously worked at Ubisoft and has known Langourieux for almost 20 years. “We focus on the artistry and try to ensure that our artists stay on top of their craft.”

Virtuos marketing manager Laurent Leriche added that big Chinese gaming companies started as internet companies and base game design decisions on data analysis and compilation. They are doing particularly well in the mobile arena. In contrast, western gaming companies are influenced by cinema and tend to focus on the storytelling and art.

The commitment to art drove the decision to open studios in Chengdu and Xi’an. There are several technical and engineering universities in these locations. But more importantly, there is a strong tradition of art and artistic training in Chengdu and Xi’an. The Chengdu studio is now Virtuos’ largest, with more than 500 staff.

Upping the stakes in China and beyond

With the worldwide games market set to reach $108.9 billion in 2017 and new gaming technology constantly being developed, Virtuos is poised to capitalize on the lucrative industry. The company has acquired studios in Vietnam, Paris and Ireland, opening offices in North America and has grown to 1,000 staff in China. It recently celebrated working on its 1,000th game, Horizon Zero Dawn from Sony and Guerilla Games, which is the best-selling launch of an original game on PlayStation 4 to date.

Despite being a China-based company, clients in North America contribute to 50% of Virtuos’ revenue and Europe makes up 35%. Only 15% of its revenue comes from Asia as mobile games make up a large percentage of the market, reducing the need for specialized console development work and 3D art production. However, Asia Pacific region makes up the largest games market and China alone generates $27.5 billion or a quarter of all revenues in 2017. Therefore, Virtuos knows that it needs to up the ante in the Chinese market. It signed an agreement with Tencent in 2011 to provide online game development services.

Virtuos is also preparing itself to take on the next frontier – VR gaming. It has spun off its VR team to form Lusionsoft, a subsidiary solely focused on research and development on VR gaming. An initial funding of more than RMB 10 million has been raised.

“For me, the main problem with VR today is that we still have cables. Or you wear the mobile device but the quality of the experience on a mobile device is not yet strong enough,” Langourieux explained to TechNode. “We still need a couple of years before we can put [a quality] experience in the hands of the consumer and in the meantime, companies like us are working on creating really amazing content.”

Tencent Tech is reporting that blockbuster multiplayer online battle arena (MOBA) game Honour of Kings has overtaken Monster Strike this May to become the world’s highest-grossing (in Chinese) game across platforms, according to data released by App Annie.

Although Honour of Kings ranked the world’s highest grossing iOS game in March and April this year, this is the first time for it, or any Chinese gaming titles, to take the crown for iOS and Google Play, a special feat given Google’s weak presence in China.

Launched in November 2015 by Tencent’s Timi Studio, Honour of Kings is very similar to League of Legends, which sees players battle beasts in a fantasy landscape. Despite the similar visual style and gameplay mechanics, Tencent has managed to successfully localize to China with subtle changes in a mobile-first product strategy, local culture-based characters, and simpler controls.

Tencent’s 2016 annual report showed that the game had over 200 million registered users and over 50 million daily active users, roughly the total population of South Korea.

Tencent’s huge user base from WeChat and QQ, which have hundreds of millions of users in the country, has always been a huge resource to draw upon in terms of acquisition and promotion. Unsurprisingly, Honour of Kings growth is in part driven by WeChat and QQ users who made in-app purchases on game items.

The game has generated revenue of RMB 10.7 billion in Q4 last year. Local media reports that its DAU surged to 80 million during the Lunar New Year in February this year.

As the largest online game publisher in China, online gaming represents 47% of the internet behemoth’s 2016 revenue. The company is going further in the industry with a plan to build an e-sports-themed industrial park in Wuhu city.

Honour of Kings’ success comes while a series of Chinese game developers are gaining momentum. App Annie’s report shows that Chinese content producers snapped four places on the Top-10 grossing iOS app list for May. Tencent took the top place, followed by runner-up NetEase. CMGE and Longtu Game took the 8^th and 10^th spot respectively in the global market.

As an important part of the global entertainment business, gaming is looking pretty good and the uprising trend of this sector is showing signs of slowing down for the near future as people living the digitalized world are seeking for more entertainment. Global venture capital firm Atomico released a report to shed some light on the latest changes in the sector.

2016 has witnessed some remarkable tipping points of the gaming industry, according to the report. Firstly, the field has become a global industry with games revenue exceeding USD$ 100 billion. To put the number into perspective, this means that the gaming industry is now worth three times as much as movies worldwide.

The surge in revenue is in line with the increasing player base, which broke 2 billion for the first time last year.  Mobile has become the most lucrative segment after years of continuous growth.

Atomico’s bullish views towards mobile gaming are shared by many research agencies. Newzoo made a bold prediction that the mobile segment will account for 42 percent of worldwide sales this year and to over half of the total games market by 2020.

China, the home to world’s top gaming developers like Tencent, is taking a fair share of this boom. The report shows that 11 out of 24 gaming companies worth more than US$ billion have come from China. Europe took the runner-up position with 6 companies

While investors have more confidence in publicly listed companies, the enthusiasm is also felt by private gaming firms. Of the total private investments, Europe is taking an increasing share of global games funding rounds, with Chinese acquirers playing a big role.

The top twenty largest games M&A transactions of the last five years have created US$ 46 billion in exit value, of which European targets accounted for 70% of the value. Looking at the origin of the buyers, 55% of deal value came from strategic Chinese acquirers, illustrative of growing interest from China.

This interest is only set to increase in 2017 and beyond, as the growing appetite for fresh content from Chinese gamers leads to investors seeking to exploit this through selective investment in European studios, the report noted.

The analysts attribute this surge to two reasons. For one, although the surge in listed entities has allowed VC communities to see increasing markups, they are often only on paper. Games companies are more than twice as likely to achieve liquidity as $B+ companies from other tech categories.

Additionally, Europe’s unique culture, as well as technical and commercial factors, have helped the region to become a world leader in mobile game development.  Many of these are subtle points, such as the region’s rich, centuries-old history of storytelling and creativity, or, its deeply connected communities of passionate individuals that came together through the region’s mod and demo scenes, creating fertile ground for mobile game development.

Most importantly, European studios were developing for mobile before it even became the “mobile” that we think of today, learning their craft building games on Java and optimizing for Nokia or Motorola feature phones, a world away from the mobile devices and games we recognize today.

On the other hand, the prosperity of European game development finds its root in rising demands from the world, of which China is an important market gaming studios can’t ignore. It’s now not only the world’s largest market of gamers – with over 600 million – but also it’s most valuable by spend, eclipsing the US and even the whole of Europe combined.

“There are unique opportunities. Almost 90% of the 24 billion dollar games companies founded in the last 15 years have achieved liquidity, proportionally more than any other sector – so games studios, especially in Europe, are a good bet. As the Chinese market continues to thirst for content, and continues to expand in size, we expect to see an uplift in Chinese interest,” Mattias Ljungman, Partner at Atomico said.

This is the fourth post of “Now in Vietnam“, where TechNode visits Vietnam’s leading companies, to explore the next startup ecosystem to emerge among Southeast Asian countries. Vietnam GDP growth could surpass China by 2020 according to Turicum Investment Management.

The cream of the US$ 215 million-sized Vietnam’s mobile gaming market is coming from these three demographics of gamers: A teenage male student, business man over 30s, and an office girl in the 20s, according to SohaGame.

 Now is the time for global game companies to enter the Vietnam market, otherwise it will be too late to skim the cream. The volume of Vietnam mobile game market in 2016 was US$ 215 million, an increase of 18% YoY but strongly decreased in comparing the growth rate of 52.5% in 2015. The market will reach to the saturated point in 2019 with around US$ 295 million, according to Vietnam Mobile game market report 2016 released by GameK.

According to the report, there were 216 new mobile games released in 2016, up 51% compared to 2015 (143 new games), meaning there were almost 2 new games released every 3 days. However, revenues in the market only increased by 18%. Also, 35% of newly released games shut down their service right in the first year.

Vietnam will stay as a promising game market in the SE Asia region, but the competition will get fiercer, as Hieu Ha Trung, business director of SohaGame puts it, “the market is not open to everyone like 2 or 3 years ago.” SohaGame is one of the top 2 mobile game publishers in Vietnam based on the number of new games released in 2016, with more than 23 released games.

Hieu Ha Trung, co-founder and business director of SohaGame served in the Ho Chi Minh-based company over six years and helped its mobile games like Socvui.com reach its highest peak visits. We talked to him about his gaming industry insights in Vietnam and tips for global gaming companies entering the Vietnam market.

Who are Vietnam’s gamers?

There are 3 types of typical Vietnamese gamers in my mind: A teenage male student, business man over 30s, an office girl in 20s.

• A teenage male student, who loves to play games day and night, he plays games after he wakes up, in the school during break times. He doesn’t have much money, but he is willing to spend about US$ 20-40 per month for his favorite games. Normally he plays 2-3 games at the same time, he loves manga, anime, Chinese and Hollywood movie and can play all games with those themes.
• A business man over 30, who still remembers all traditional Chinese movies he watched when he was a small child like Three Kingdoms, Water Margin, and Jinyong Kungfu novels. He loves to play the games which can remind him of those good memories. He is busy and can only play games for about 1-2 hours per day when he has free time. He is picky but loyal to the games he likes and is willing to spend money on them.
• An office girl in her 20s, who never play games before, but now she loves killing time on match-3 games or some farming games. She plays for fun, spends a little money on each game she plays. She loves to show the result she gained in the games to her friends.

What types of game appeal to Vietnam’s gamers?

The most popular games in Vietnam are still MMORPG (Multiplayer Online Role-Playing Game), card battle and ARPG (Action Role-Playing Game) with Chinese or manga stories.

VR game is the new trend in the next 2 or 3 years, now we see it still has some barriers in the hardware to reach to all normal gamers as a personal device or for home play. During the next 3 years, e-sport on mobile will be very potential in Vietnam and the region, we are expecting a booming of this new generation of entertainment.

How do you publish your game in Vietnam?

Vietnamese government departments ask companies to have a game operating license. There are 2 types of publishing license required in order to publish games in Vietnam: one for the whole company, and one for each title the company will publish, including the content and technology documents. It’s a big barrier for game companies to enter this business, but in another way, it helps those companies to professionalize their business before providing it to customers.

Why is Vietnamese gaming market the fastest growing market in the Southeast Asia?

Vietnam population is 94 million in 2016, and more than 40% are under 35 years old, and the total number of gamers is 36 million, which is a huge market for the game industry. In geography, Vietnam stays only in one mainland, which is not separated into many islands like the Philippines and Indonesia, and 90% of Vietnam population is from one ethnic; that helps game publishers easier when to publish games and target to the audience.

The basic foundation of internet and 3G in Vietnam is also one of the fastest and cheapest services in the region. Starting from $2.5 USD per month for a 3G subscription fee, you can have 500MB 3G with high speed to play games. Also, the payment method of prepaid phone card is very popular around Vietnam, which helps gamers to buy and pay for the game anywhere, anytime they want.

Toy-to-life games, a category that creates immersive gaming experiences by connecting digital gameplay and physical toys, has become very popular in the west. Activision, the game maker that injected vigor into the genre with its Skylanders franchise, sold over US$ 3 billion worth of games and toys worldwide by 2015.

However, the category has yet to become a big thing in China. But it won’t take long before toy-to-life craze hit the middle kingdom, according to Shen Jia, founder of PowerCore, the Tokyo and East Palo Alto-based startup that aspires to bring its technologies here.

Founded in 2013, PowerCore creates and distributes collectible smart toys that can be scanned into games via NFC or QR codes for a reactive gameplay experience. In addition, the startup also handles digital activations and provides merchandise solutions to gaming companies and brands.

Stumbling blocks

“People always tend to think toy-to-life more about one franchise and a console-type of gaming experience. A couple of problems that was specific in China,” Shen Jia says. “One was that consoles don’t exist here, the other is the console that’s being able to get collection things might be a little big difficult for people to store it in their houses.”

To counter these obstacles, PowerCore’s solution is focused entirely on mobile, in line with China’s shift to mobility. “The toy-to-life sector as far as mobile concern doesn’t really exist right now, even in US and Japan.”

The best form of toy-to-life games, according to Shen, is something like Pokemon Go, where there’s more real life interaction with digital experience. “As a game structure, it incentivizes people to leave the house and do interesting and weird things,” he says. “We have games that help you interact with the environment, with the products you purchase as well as the place you go, that’s what we think the future toy-to-life sector would be like.”

Feeling like a VIP

There’s always something lost in translating the hot IPs from one medium to the other, even if they do, there’s another barrier to overcome, the loss of audiences who share passions for that content.

Shen, who is a big fan of Transformers, cites a personal experience to illustrate this point: “Before what happens is each of the licensed individual properties is doing the marketing themselves,” he says. “If a Transformer film is publishing, there would be movie trailers and the game itself would be promoted by advertisements, and the toys will be in the store by their own advertisement. None of them would work together.”

Through cooperation with IP right holders or movie studios, PowerCore’s platform does allow them to tie that all together by cross-referencing contents that share the same IP. Those who watched a certain movie can use their tickets to unlock cool characters in the game, or if you play the game to a certain level, you can get a discount when buying a movie ticket.

“We create a platform where people like a specific movie franchise to interact on all the different levels,” he adds. “When all of the IP properties work together, as a fan I feel more like a VIP: when I go to the game I have a benefit.”

“If you think from a movie studio and IP point of view before they wouldn’t know the LTV (lifetime value) of a real user. They only know the game LTV, but they didn’t know that the same person that plays this game also bought movie tickets and also bought this toy,” Shen Jia says. “Now we kind of measure that specific LTV of a user at multiple touch points.”

China, Japan, and the US

Shen is also the co-founder of RockYou, which created widgets and apps for MySpace and Facebook. As a serial entrepreneur with experience in the US, Japan, and China, he compared with startup ecosystems in the three countries.

Silicon Valley and Beijing are no doubt the top-level startup hubs with top-notch resources in terms of funding, overall talent pool and innovation speed. The difference between the two cities, according to Shen, lies in how exits work.

“That process is still a little mixed in China. The whole system is changing and everyone in China adapts to the changes a lot faster, so most of the companies look at business models a little bit short term, as opposed to the shoot-for-the-moon type of thing like Facebook and Snapchat,” he says. “Those types of startups are having a harder time starting in China, but in general, the innovation speed in China is ridiculously fast now.”

Japan is still pretty slow as far as startup innovation, Shen thinks this is in part because the culture of being safe still prevails in the country. “Despite the government is very supportive of the tech startup, no nobody is willing to try things that are really adventurous because if you have a failed startup they think you suck, which is kind of nuts.”

Sweden, home of many very successful technology companies, has a lot to say about how China can be more innovative and successful.

Sweden’s unique advantage for global market: its size. Given that the market size is small compared many others, companies are automatically geared towards the global market. This, interestingly, is exactly where Chinese companies have a big problem. Their market is so large that their first consideration is domestic, then global. However, going outward, rather than beginning outward, can be amazingly difficult.

This was exactly the topic of the Sino-Swedish Innovation & Entrepreneurship Forum held on November 21, 2016 at the Zhongguancun Yonghe Hanxing Science Park in Beijing.

With an entrepreneurial culture tied to the Nordic tradition of solitary living and, some may even say, going all the way back to the Vikings, Sweden and China are at opposite ends of many spectrums. So, to learn more about Swedish entrepreneurial culture, its games industry, and what China can learn from it, we spoke with Peter Levin, CEO of Goodbye Kansas, a VFX, motion capture, and animation company whose studios have been involved in some of the biggest AAA games in recent memory.

How did you get started in the games industry?

I got started because I was interested in creative people and creative businesses. I’m not that kind of person myself; I’m more of a complement to them. In the late 80s, I started a business that imported and distributed Sega in the Nordic countries. At the same time, I also started working with games studios because that’s where you can create real value: your own IP or educating or developing studios and people. In 1996, I was headhunted to Electronic Arts.

How does China fit into your company or your personal vision?

Everything we do is trying to act global. When Western people say that unfortunately, they don’t necessarily mean Asia for one reason or another, but adding China and Asia is an amazing thing. I’ve always been challenged by China.

The game industry is quite young, about 35 years old. The VFX industry is younger, about 25 years old. Now, those two industries are growing like never before globally. We have two approaches now with China: one is to work with the film and TV industry and then, of course, with the games industry.

Sweden has had a number of successes in the games industry over the past decade, in part because of the engineering as art heritage we received from Ericsson and Volvo. What we have developed is skill, responsibility, and transparency that is very different from the development approaches by studios in UK or France, for instance.

Now we are seeing the second wave, in the Swedish and global markets, where indie developers can go directly to consumers through online distribution platforms and we want to make sure to be involved in helping Chinese indie developers.

How do you see Goodbye Kansas getting more involved with game developers in China?

We’ve had Chinese developers and publishers visit us in Stockholm and now I’m here in Beijing. What we talk about is how our game development model is a bit different. We typically own never less than 25% and never more than 50% because we want to encourage studios to feel a sense of ownership. We then support them with resources from our executive producers, our services from VFX and animation companies, all the dull things like bookkeeping, and money.

We see Goodbye Kansas as a building bridges with investment going both ways. More importantly, its about exchanging knowledge. We have in our ecosystem, Goodbye Kansas GameInvest, young and senior producers and developers who are looking for more opportunities all around the world.

What are some of the challenges you see in trying to be a bridge?

From my experience here in China six years ago, there most certainly are cultural challenges, but Swedes are familiar working around these challenges; even in the Nordic region, there are different cultures. Coming to China there will of course be some big challenges, but the challenge is one of the reasons we want to do it: it’s great fun and interesting to get know other cultures. And, with China’s influence in global markets, you just have to bridge that.

One big challenge we see are differences in aesthetics; Chinese people prefer much more colorful, flamboyant games. Another challenge is mobile. We don’t do mobile because it’s extremely crowded and we don’t have the skills in house, but that may change in the future with more cooperation with Chinese developers and publishers.

What would say Sweden has to learn from China? What do you think China has to learn from Sweden?

I think we have everything to learn from a country like China that has grown so rapidly over just a short period. We have a lot to learn from that rapid growth, but also how to manage that growth.

The other way around, when I meet Chinese people, they are always so curious how could a country survive, much less be successful in that climate, with only 10 million people in a huge area. Our entrepreneurship started a long time ago, maybe even with the Vikings on how to survive and develop further. And, more recently, we have seen a lot of success stories over the last 10-15 years with one success feeding another. With Swedes being normally quite solitary, we are still very loyal.

I believe that the growing VFX industry along with the games industry is a very interesting mixture and fits very well with China. The Chinese film industry is like Klondike during the Gold Rush. Then, of course, there’s AR and VR where China is a bit ahead. We are doing VR stuff as well, but the market itself is not that big yet.

Tipping wait staff for food, hotels, taxis or other service-based industries isn’t the norm in China.

While it is widely believed that Chinese consumers are generally unwilling to participate in the tipping culture, a wealth of online ‘tip’ services shows otherwise. In fact Chinese netizens commonly tip on a range of online services from literary works to live-streamed performances.

Tipping online is called ‘da shang'(打赏), or ‘shang’ (赏) for short, a practice in ancient China that the upper class rewarded people with a lower social status. Da shang oftentimes happened during performances, when audiences would give gifts or cash to performers who belonged to one of the lowest social classes back then. In those days some types of performances, especially those performed on the street, didn’t charge admission but relied solely on tips voluntarily left by audiences.

It is believed, though artists are not perceived as socially disadvantaged anymore, that explains why tipping artists and content creators is popular in China while other forms of tipping have gone by the wayside.

Some tipping-enabled platforms even have charts ranking top virtual gift buyers, which gives them a social status boost in the virtual world, and in turn encourages more consumption.

As online payment is becoming increasingly commonplace, tipping has become an important revenue stream for many online content and service providers. Some who count on contributor-generated content and services unsurprisingly take cuts from the tips.

A Must-Have Feature On Various Publishing Platforms

Most tipping norms and practices in the Chinese online world can be traced to the gaming world. Literature works published online also attract a large number of tips.

In 2013, an author known as Meng Ru Shen Ji received a tip of 1.58 million yuan (more than $200,000  USD) from a 24-year-old business man. In 2014 a reader in his 60s gave a 1 million yuan tip to Tang Jia Shan Shao, a celebrated author.

The price for a work originally published by Chinese online publishers, normally based on the number of Chinese characters, was generally lower than that for a print book. It was the tipping feature that helped top-grossing authors make tens of millions yuan in annual income.

Now most Chinese online platforms that enable text, audio and video publishing have enabled tipping in the hope of generating more or less extra money for content creators or themselves, in addition to revenues from advertising or paid consumption.

Alipay, the online payment service from Alibaba’s finance arm, and WeChat Payment, the mobile payment solution by Tencent, are among the most popular payment solutions adopted for giving tips.

Sina’s blogging platform and Weibo, the leading Twitter-like micro-blogging service affiliated with Sina, added a tipping feature in 2014.

In the period from June 2014 to June 2015 a total of more than 50 million yuan in tips went to Weibo post authors, according to Chen Fuyun, vice president of Weibo operations.

WeChat, China’s most popular mobile messaging app, enables businesses or writers to publish articles through its official account system (aka. public account system). While the service has recently begun testing a paywall, a tipping feature was added in May 2015.

WeChat allows for up to 256 yuan (US$40) for each tip. Transactions are processed by WeChat Payment, which takes only two clicks to make a payment within the app.

Alipay’s mobile app, which provides a variety of financial services and more recently added social features, began to allow users to tip for content shared onto its social sharing platform or on its live streaming channel in October 2015.

It generates random tip amounts and no password is required for a transaction of less than one yuan.

Travel diaries shared onto social travel service Mofenggo can also receive tips through Alipay or WeChat Payment.

More Money in the Entertainment Industry

It’s not surprising that average entertainment industry fans are willing to spend more money to show their support than those of authors.

Five hours after pop singer Hua Chenyu posted his new single on Weibo in August 2014, he received some 105,000 yuan through about 23,000 payments. The song download was sold at 2 yuan and tips were allowed. So the money paid as tips amounted to more than twice the song sales.

A survey conducted by Tencent’s online media division at the end of 2015 shows that about 6 percent of a survey of more than 7000 paying music users tipped singers online.

The whole industry of online interactive shows, which is huge in China, has been dependent on virtual gift buys from audiences for revenue generation. Kugou, one of the leading online music companies, saw some 70 percent of their total revenue come from virtual gift sales on their interactive video platform, according to a recent report by Jiemian.com, though its music streaming service is one of the biggest in China.

Will It Change the Tipping Culture in China?

Digital tipping is so popular in China that a few startups focusing on it have emerged. With a plugin like this one WordPress bloggers can receive tips through WeChat or Alipay.

Youshang, launched in August 2015, is dedicated to helping anyone collect tips on various online or offline occasions via QR code, which is widely accepted among Chinese mobile payment users. Both Alipay and WeChat Payment are equipped with QR code readers to process payments. WeChat can also read QR codes shared between users and complete transactions within the app.

Now street performers don’t need a tip jar anymore but a QR code generated by a service like Youshang. A few services like Youshang are also encouraging restaurant wait staff to ask for tips through digital tip jars.

iDreamSky, the company known for localizing popular western apps including Fruit Ninja and Temple Run, has paid $10 million USD for a majority stake in Silicon Valley-based game startup Rumble, according to the Chinese company. It’s the most significant foreign investment they’ve made since announcing plans to privatize their Nasdaq-listed company.

The partnership will allow iDreamSky to publish Rumble’s highly popular KingsRoad game on the mainland. Rumble focusses on higher quality mobile games, but has struggled to compete with big names in the market including Clash of the Clans, which already has a significant following in China.

iDreamSky has had a series of hit-and-miss game localization attempts, but has tapped into a vein of high profile apps to drive their growth. Earlier this year they announced they would be modifying the highly rated Temple Run 2 game with an added Bruce Lee character exclusively for Chinese audiences.

While online and mobile gaming is a rapid growth industry in China, the market is seeing some saturation and even large players are reporting lower revenues. Industry giant Tencent revealed that game growth had significantly slowed in their Q2 results this year, dropping from 28% to 17% in the preceding three months.

iDreamSky is one of many Chinese tech companies looking to privatize and re-list locally, as confidence in Chinese tech stocks continues to grow despite volatility in the past six months. After listing in August last year, the company announced just ten months later that they would be considering a privatization proposal led by CEO Michael Xiangyu Chen. Other Chinese companies with gaming who have considered privatization include Qihoo 360, Renren, Snda Games and Perfect Sky.

According to their most recent earnings report the company has 118 million monthly active users and saw a 113.6% jump in revenue growth since last year. Their share price dipped to $7.00 USD in April, less than half their original listing value, but has since rallied to a healthier $12.50 USD per share. 

@catecadell

Image Credit: Rumble [KingsRoad]

As mobile connectivity surges in China, a handful of companies are battling it out for top spot in one of the country’s fastest growing revenue makers: mobile gaming.

Internet giant Tencent currently owns 14 of the top 30 most downloaded games in China, according to game-industry media company Gamegrapes, however other players including Netease and Chanyou are vying for the spot.

Internet giant Tencent has come out on top by successfully leveraging its triple-roles as a game developer, publisher and game platform using WeChat. NetEase listed four apps among total 30. 3D games such as MMORPGs are largely produced by Sohu’s online game subsidiary Changyou, developer of Tianlong, seizing users with games based on classic Chinese novels. 

Perfect World developer of classic IP games, acquired its rival Shanda Games last year, now boasting its 600 million users. Supercell’s Clash of Clans started from Helsinki, Finland is now a worldwide favorite topping several charts in China.

Other games such as One Hundred Thousand Bad Jokes is gaining popularity for its familiarity, made from serialized comics from Chinese website YouYaoQi. Buying the license from a renowned animation or movie has found favor with game developers, since the people put great value on brands. 

Smartphone OS market share in China shows that Android takes 72.8%, while iOS takes 25%, Window and Blackberry phones hardly show mere percentage, while in the U.S., Android takes 51.9% and iOS takes 42.8%. With a handful of app stores in the market like UC, 360, Baidu, Mi, Wandoujia, competition is hot in game distribution. Tencent’s Wechat proved mobile messaging platform a great money making platform for game distribution attracting revenue from its self-developed games and acquired game companies. To make a diversion, Wandoujia announced a new revenue share structure that benefit game developers last year. Recently, Xiaomi’s App Store MiUi reported its 100M userbase, which helped its third-party mobile games to reach high sales revenue last year. 

To foreign companies, GameGrapes’s partner, Tianxiao Shi highlighted on localizing the games apart from translation. “Foreign companies should understand China’s users when localizing the product. You need to analyze the trend, discover why people like certain game, and try to adapt to your games to cater to China users. For example, South Korea’s games are strong on design capacity, so they should focus more on the story. It’s better to provide free games since Chinese users are not yet used to paying model.” Shi pointed out, adding that “It’s important for foreign companies to find a good publisher to launch their product. “

Shi released information on the state of the gaming industry on the Chinese game market at a conference held in Seoul co-hosted by Money Today and AppAnnie. 

Image Credit: GameGrapes

The monthly active users (MAU) of Chinese mobile gaming industry surged 4.5 times year-over-year as of August 2013, according to a report jointly released by Chinese mobile analytics and service provider Umeng and digital entertainment expo ChinaJoy.

The growth speed is faster than the growth rate for Chinese mobile devices, which totaled 590 million as of the third quarter of 2013.

The report added that adventure games, causal games, chess and card games, sport games and strategic games took the top five spots in terms of growth of daily engagement times. Users are spending more time on soft-core games, with more than 42.1% of gamers choose casual games as their top options. The five most popular game categories in terms of time engagement are puzzle, action, chess and card, casual and sport games.

Top 5 Game Categories in Terms of Growth Rate for Daily Engagement Times

(2012-2013)

Data source: Umeng

iPad users spend an average 6.7 minutes on games per time, higher than 5.1 minutes for iPhone and 5.8 minutes for Android devices. In addition, the daily gaming time for iPad users is 17% higher than that for iPhone players.

According to Umeng’s data for September 2013, the 1-Day and 7-Day retention rates for WeChat games that are shared by friends are 32% and 10.5%, respectively, higher than the retention rates for standalone game apps. Mobile games that have social networking features can attract more active users, citing the report.

image credit: Umeng

Be frank, I was not so sure why iGaming Asia Congress, the region’s leading event for the interactive gaming community is held in Macau every year. In my understanding of (online) gaming, it’s all about MMORPG, social games etc. So when I’m invited by the organizers, I was wondering, uhm… what Macau is to do with the online gaming industry and what’s the purpose of my giving a speech about mobile web?

Talked to a few attendees right after my speech, Capitalising on the next generation of smart/connected devices, I started understanding the local online industry. The attendees are mostly from local, Hong Kong, Philippine etc, and I feel like at least half of them are working on the same industry: online interactive games, i.e. online gambling and casual games. They are quite interested to know,

• how to access the social networks to reach more players? (surprisingly, a few of them mentioned Kaixin001 to me and know nothing about RenRen…)
• how virtual good and virtual money works in Chinese online industry; whether it is supported by government?
• whether it’s worthy of spending resource to launch a mobile version (either a mobile site or an application) and how.

I might be too rush to draw this conclusion, but the first impression I have right now is that Macau has a huge potential market for online gaming. Mainland Chinese companies, even international companies, such as social networks, gaming-related service, social (casual) game developers and mobile applications developers should look into it for interesting partnership and outsourcing projects.