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China Game & Entertainment Industry Review
With game license approvals gradually resumed since April, sentiment on the online game industry has finally improved. A smaller pool of games is expected to get approved under the new license approval regime, forcing gaming companies to focus on development of resources to fewer number of titles, mainly premium ones. For the first two batches approved so far, the Chinese government has prioritized small to medium-sized gaming studios over the large ones. Into 2H22/2023, the market is expecting several global IP title releases, including Diablo Immortal (China) and DnF Mobile.
Game License Approval Resumption Incrementally Positive
On 11 April, the National Press and Publication Administration (NPPA)'s approval of the monetization license (Banhao) for 45 domestic games marked an official close to the 8-month long game license issuance suspension, vs. the 9 months pause in 2018. The resumption is incrementally positive to the whole industry and could re-vitalize the overall gaming industry sentiment and continued investment/R&D into new games.
Regular game approvals are likely to normalize towards a monthly release schedule in the future, though the total number of approvals per batch may be fewer than the pre-suspension period of average 102 per batch during April 2019
As evidenced by the games approved so far, Chinese authorities have been prioritizing those from small to medium-sized gaming studios over the large ones like Tencent, NetEase, and Bilibili, due to the former’s higher reliance on a single game title which makes them more vulnerable to license approval halt. That said, we expect gradual approvals of titles developed by larger gaming companies in the future, driving improved revenue growth trend domestically.
Looking ahead, global IP titles like Diablo Immortal (mobile game jointly developed by Activision Blizzard and NetEase) and DnF Mobile (mobile version of the legend PC game Dungeon & Fighter) are expected to be approved in the second half of the year or early 2023, in our view.
Post-Covid Normalization a Global Concern
The global mobile game industry (ex. China) is in the midst of a transition due to tough comps created by the pandemic benefits for the majority of 2022. In fact, global mobile game grossing saw another yoy decline of 8% in May, according to SensorTower. As a result, we expect lower international game revenue growth for Chinese gaming companies from 2Q22.
Entertainment: Last Round of regulations Likely on Livestreaming
In May, Chinese authorities jointly issued a note regulating livestreaming tipping, which took effect on June 7. The new rules require livestreaming platforms to: 1) limit the number of cross-channel player knock-out (PK) battles to two per account during 8pm-10pm each day and prohibit “punishment” for
The set of regulations likely marks the end of this round of regulatory tightening (started in 2020) and should help lead to healthier development of the industry. Some platforms have added daily spending reminders (users can voluntarily activate the function), which should help to reduce impulse spending and address clauses stipulated in the Feb 2021 guidelines.
The limits on
Growing E-Commerce with Livestreaming during
Livestreaming, as an interactive and entertaining format, continues to attract major brands and merchants, who are now more inclined to conduct in-house brand livestreaming sessions rather than hiring
Short-Form Video: Continued Momentum
Short-form video remained the structural winner in 2021/2022, further expanding its user time spent market share to 27.7% by Feb. 2022 (according to QM, April 2022), with ByteDance in particular taking share from other internet giants.
The proliferation of feed products/features and the ramp-up in user traffic monetization at those platforms have added a large amount of incremental ad inventory to the industry, and thus have further intensified competition and led to higher pricing pressure for Tencent's social ad business.
August 15, 2022
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