The crackdown on video games continues in China. The Chinese National Press and Publications Administration (NPPA) has yet to release its list of new licenses authorized. The last one dating from July 2021, it is now the longest suspension since 2018. The move is leading many small companies in the sector to close in China, and is pushing the giants to look to other markets.
China continues its repressive regulation of video games
The freeze on new licenses approved in China extends into 2022. Regulatory authorities, including the NPPA, in charge of video game licenses in China, have not published a new list since the end of July 2021. It is now the longest suspension since a previous one, lasting nine months, in 2018 after the entry into force of a new regulation.
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Restrictions on video games are therefore not new in China. For several months, it has tightened its regulations with regard to video games, and more generally technological giants, including certain creators and studios. Several laws govern the use of video games. A new legislation on personal data first came into force, the Personal Information Protection Law (PIPL), very close to the European GDPR. Technology companies are forced, by this text, to comply with Chinese surveillance agencies.
At the same time, the country led by Xi Jinping passed a law regarding underage players. Since this summer, Chinese under the age of 18 are no longer free to play as they wish, their playing time being supervised and limited to one hour per day during the weekends. During the week, the limit is set at three hours. Large companies that develop online games, such as Tencent, must themselves limit this time. According to Beijing, these are measures to fight against dependence.
No explanation, nor any information on a possible resumption of the approval of new licenses, was given by the NPPA. Usually, it allows between 80 and 100 new games, in the middle or at the end of each month, since May 2019.
China is the number one market in the video game industry. The restrictions therefore have a very significant impact on businesses. Image: Marketing to China.
The economic consequences of these changes are significant, not least because China is the world’s largest video game market. Innovation and development are also impacted and hampered. In 2019, China was already the largest market, with a turnover of 20.5 billion euros, according to Marketing to China, which estimates it at 23.3 billion in 2023, far ahead of the United States.
14,000 businesses closed
The economic consequences of these measures, as well as the extension of the freeze on new approved licenses, are significant, including for Chinese players. Several thousand companies and studios have thus had to close. Concretely, 14,000 have closed their doors and have been deleted from the register of companies since July alone, according to a report published on Friday, December 31 by Securities Daily. This figure represents a significant increase, since over the whole of 2020, 18,000 companies have stopped their activity.
The giants are also affected. TikTok, Baidu and Tanwan are already expecting big financial losses. Several of these companies have planned to lay off employees working in divisions relating to video games. Baidu has notably planned to part ways with nearly 100 people, according to South China Morning Post.
Others, like Tencent and NetEase, are trying to offset the losses by investing more in foreign markets. Tencent, which owns the largest video game company in the world through Tencent Games and its subsidiaries (such as Supercell), for example plans to open a new studio in Singapore. For this, Pony Ma’s company will rely on its subsidiary TiMi Studio, among others at the origin of Call of Duty: Mobile. TiMi is already established in Seattle, Los Angeles and Montreal.
In addition to protecting the young, the tightening of regulations in China also allows the power to regulate large technology companies, like what has already been done with the PIPL and in other sectors. The losses caused weaken companies that are often in a monopoly position and strengthen the position of regulatory authorities. The crackdown is also affecting foreign games and studios like Epic Games, which recently pulled Fortnite from China.