China suspends ban on video game consoles
China has temporarily lifted a 14-year-old ban on selling video game consoles, paving the way for Sony Corp, Microsoft Corp and Nintendo Co Ltd to enter the world's third largest video game market in terms of revenue. China saw video game revenues grow by more than a third in 2012 to nearly $14 billion last year, but console makers are likely to face an uphill battle for market share in a country where a whole generation has grown up without a PlayStation, Xbox or Wii and where free PC and mobile games dominate.
Copyright Reuters, 2014
The absence of consoles has left PC games with almost two-thirds of the market, according to data released at the annual China games industry conference in December. Browser gaming accounted for just over 15 percent and mobile gaming was nearly 14 percent, the data also showed. "If Sony and Microsoft want to expand in China they need to think of changing their business model, and study the success of Internet gaming market providers where games are free but they charge money from operating games," said Roger Sheng, research director at tech research firm Gartner.
China had banned games consoles in 2000, citing their adverse effect on the mental health of its youth. The suspension of the ban permits "foreign-invested enterprises" to make game consoles within Shanghai's free trade zone and sell them in China after inspection by cultural departments, the government's top decision-making authority, the State Council, said in a statement. The statement, posted on the council's website on Monday, did not give more details and officials were not available to clarify the ruling, or say how long the suspension would last.
The video game sector has been battered globally by the proliferation of free games on mobile devices and PCs, as well as on social networking sites. In China, the most popular video games are often free to play, with gamers only paying for add-ons such as weapons or extra lives. For console makers seeking to expand in China, price may be a problem. More than 70 percent of Chinese gamers earn less than 4,000 yuan ($634) a month, according to Hong Kong-based brokerage CLSA. The new Xbox One sells for nearly $500 in the United States, while Sony's PlayStation 4 goes for just shy of $400. New games for each console cost around $60.