China

If the Xbox Came to China, Would the Chinese Notice?


A Chinese man plays online games at an Internet cafe in Beijing

Photograph by Liu Jin/AFP via Getty Images

A Chinese man plays online games at an Internet cafe in Beijing

Twenty-four-year-old Zhu, a banker in southwestern China, took time Tuesday out of his busy schedule working for one of China’s leading banks and playing five to six hours of video games a week, to share his gaming ambitions. He loves the multiplayer online game World of Tanks—which has 45 million registered users worldwide—plays mostly alongside close friends, primarily uses his own laptop, and usually commands digital armored vehicles on weekends.

However, he wasn’t all that excited about rumors that the Chinese government might lift a ban on legal imports of video game consoles—a tidbit first attributed to an unnamed source in the state-run and sometimes unintentionally hilarious China Daily on Monday, and subsequently picked up by Reuters and other Western outlets. It’s not clear there’s anything to the chatter, as a second culture official denied the report to Reuters. Still, the news item did give an apparent next-day boost to the Tokyo-listed stock prices of Nintendo and Sony (SNE), which make the popular Wii and PlayStation game consoles (a rare instance of state-run Chinese media helping Japanese companies).

If the rumor were true, would it have much impact—is China home to millions of Xbox-deprived youth? Zhu says the ban hasn’t proven a huge impediment to him: It’s “not difficult to get a PlayStation Portable or Xbox in China. … I believe most of them are smuggled.”

His friend in Chengdu and fellow gamer, Deng, who is 24, works for a family business, plays six to seven hours per week, and favors the online game World of Warcraft (it has about 9 million global subscribers). He in fact already owns a Sony PlayStation—there’s “no problem purchasing it in China.” However, Deng adds, “I don’t really use it very often.” The reason is telling: “Unlike online games, PlayStations have no friends’ connections”—in other words, most of his friends don’t own them, and so they can’t play together simultaneously.

Gaming culture in China has evolved as something distinctly social. Maybe it’s seen as antisocial to outsiders—but among gamers, it’s clear that you play with friends, both side by side and remotely. (Zhu and Deng are often joined online by a hometown friend who now lives in Australia.) The current equipment they have—a computer with an Internet connection—works just fine, say Zhu and Deng. At present, they wouldn’t want to sacrifice connectivity for additional features.

The sale of actual video game consoles has been illegal in mainland China since 2000. The official reason is to shield youth from bad influences. Several industry analysts, however, suspect the real reason may in part be protectionist, as the leading makers of game consoles are Japanese and American companies: Nintendo (NTDOY), Sony, and Microsoft (MSFT).

The ban certainly hasn’t done much to stop the explosion of gaming culture in China, which has evolved to focus on multiplayer online gaming. The total revenue for online computer games has ballooned, according to data from Niko Partners, a California-based consultancy focused on the Asian video game market, from about $10 million in 2001 to $9.4 billion in 2012. Lisa Cosmas Hanson, the company’s founder and managing partner, estimates there are now 30 million to 40 million people in China who spend more then 22 hours a week playing video games—she classifies them as “hard-core gamers.” (Those who play more than 30 hours a week are labeled “super hard-core gamers.”) Roughly 70 percent of hard-core gamers are men. Many others, male and female, play games more casually, for instance, on mobile phones.

“The games that work better on computers become the most popular in China,” says Charlie Custer, editor of the Tech in Asia online news site. Consoles “don’t do the kinds of online games that Chinese gamers like the most: massively multiplayer online role-playing game, with thousands of people all playing the same game online at the same time.” These games generate revenue either through subscription models or, Custer explains, “based on in-game transactions—for example, the sale of special weapons or costume items.”

Even if it were legal to stock Xboxes in Chinese hypermarkets—and even if Chinese gaming tastes evolved to create a demand—Michael Pachter of the financial-services and investment firm Wedbush Securities says, “You still can’t make money with the current business model … because of piracy.” Typically, “game consoles are sold at low prices, or a loss, and the money is made on software sales.” But that requires a level of anti-piracy enforcement not present in China today. “I don’t know that Sony or Nintendo are ever going to make a large profit on games in China.”

Hanson says she speaks regularly with officials from the Ministry of Culture and the Ministry of Industry and Information Technology, which jointly oversee regulations pertinent to gaming in China, including the console import ban. Although rumors from time to time emerge that a change might be coming, she says, “Right now, I see no reason to suspect the ban will be lifted.”

Zhu and Deng aren’t holding their breath either. Besides, they have digital armies to command—alongside World of Tank’s 45 million other online users.

Larson is a Bloomberg Businessweek contributor.

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