China’s console and TV games market to grow from $ 997 million in 2019 to $ 2.15 billion in revenue by 2024, market researcher says Niko Partners.
The Chinese combined console game market includes revenues from the gray hardware and software market as well as legal sales, Niko said. The gray market includes consoles which are intended for other markets but which are in fact sold and used illegally in China.
Most consoles have been gray market products in China in the past because consoles were banned. But starting in 2014, China slowly expanded production of the legal console market for Sony PlayStation 4, Microsoft Xbox One and, most recently, Nintendo Switch consoles. While the number of legal consoles is expected to increase from 460,000 in 2019 to 975,000 in 2024, the number of gray market consoles is expected to decrease from 1.18 million in 2018 to 1.02 million in 2024.
The total number of console players has reached 11 million in 2019 and will reach around 19.15 million in 2024. The reason why revenues will be high but sales of new consoles are so low is that there are a lot of players on existing console systems that own the gray market systems, but they still spend money on console games, said Niko Partners president Lisa Cosmas Hanson in an email to GamesBeat.
“Consoles need a large installed base for sales of software and services to increase,” she said. “The price of the hardware will be decisive, as will the features and games provided by each console. For example. Change popularity in China spurred by non-core games like Ring Fit Adventure as well as social titles like Animal Crossing. China’s difficult regulatory environment is currently negative and prohibits growth of the legal market. “
The main reason for the slow growth is the approval of the games and the regulatory environment, but also the lack of investment in a domestic console game industry. Sony launched its China Hero Project (Funding from Chinese game developers) with mixed results, but now giants such as Tencent and NetEase are exploring console games as they aim to reach console players abroad and at home, said Cosmas Hanson .
“The gray market allows players to get software that is not yet approved as well as hardware that has not yet been released,” she said. “The gray market of the Nintendo Switch is more popular than the legal version because it can access online servers abroad to download games from the gray market, which the legal Nintendo Switch cannot do.” Many triple-A games for older consoles and games not sold in China are only available on the gray market. “
The increase in spending until 2024 will be mainly due to the continued sales of Nintendo Switch, the introduction of a new generation of consoles with Sony’s PlayStation 5 and Microsoft’s Xbox X, as well as the increase in demand for HD games available on consoles, abroad and national publishers.
The gray market plays an important role in China due to strict regulations which have led to limited legal console games, and is expected to remain the majority of revenues until 2024, as Chinese players import titles from overseas when ‘they cannot buy an official version on the domestic market.
PlayStation 4 is the current market leader, but will be overtaken by Nintendo Switch, which is selling at a faster rate. The PS5 and Xbox Series X (which are scheduled to launch in China in 2021) will be the main drivers of growth.
Cosmas Hanson said consoles have been a niche product in the Chinese games market for a very long time, not only because they were once banned, but also because China has a dominant culture of free-to-play on PC and mobile. Cloud gaming and cross-platform development solutions will be a way for console game developers to reach more players in the country.
She said Niko recommends a cross-platform approach in China, targeting the console alongside the PC and mobile. Cloud games, which allow players to play console games on PC, mobile or smart TV, are also becoming an option for console game developers to reach even more of the 716 million Chinese players.
Niko’s data is based on a survey of 2,400 players in March in major Chinese cities.
Many cities in China have already authorized the reopening of PC gaming cafes since the end of March. The Ministry of Culture and Tourism also issued a notice on May 12 regarding its directives regarding the reopening of Internet cafes.
Niko said that COVID-19 in the Chinese games market is severe, because 57% of cybercafé players do not plan to return to play icafes after the end of the pandemic.
“However, we may be able to see people massively returning to PC game cafes in the third quarter of 2020 (after September 1), as this will be the time when students begin their new school term. Hopefully the COVID-19 pandemic will be over or will already have a low impact by then, “said Cosmas Hanson.