The news from the Chinese gaming industry is not good. According to a recent report, China’s overseas gaming revenue plummeted by 20% in 2022 – a sharp decline that could have potentially huge implications for the world of video games.
The drop-off comes as no surprise given the pandemic-induced economic crisis and travel restrictions that have affected all industries across Asia. With fewer people traveling abroad, there has been an obvious reduction in spending on gaming products and services in foreign markets.
What makes this drop particularly alarming?
The drop in foreign sales of China’s top 30 mobile games is particularly alarming because it underscores the fact that Chinese publishers are increasingly looking overseas for growth opportunities as their domestic market continues to contract. Sensor Tower, one of the leading market research firms, reported that China’s top 30 mobile games had a total revenue of $9.2 billion on Apple’s App Store and Google Play in 2022 – an amount equal to what was seen in 2020.
The drop coincides with a worldwide drop in spending on the two platforms, with overall gaming revenue falling 9% year on year to $78.8 billion last year.
This is an indication that the gaming industry has been adversely affected by the COVID-19 pandemic and its resulting economic recession, something which Chinese publishers had hoped to offset through their overseas expansion efforts. However, with this latest data showing a drop in foreign sales of China’s top 30 mobile games, it seems those efforts have not paid off yet.
Things that affected China’s gaming industry
The decline in Chinese gaming revenue and overseas sales can be attributed to a number of factors. Here are some of them:
- Pandemic-induced economic recession
- Lack of travel due to the pandemic
- Increased competition from other countries
- Ban on Chinese-developed applications
Pandemic-induced economic recession
The most significant one is the pandemic-induced economic recession, which has caused widespread disruption and stagnation worldwide. This has led to an overall reduction in spending on video game products and services, particularly those that come from China.
Lack of travel due to the pandemic
Furthermore, the lack of travel due to the pandemic has drastically reduced spending on gaming products and services in foreign markets, further exacerbating the decline in Chinese overseas sales.
Increased competition from other countries
In addition, increased competition from other countries such as Japan and South Korea has also contributed to the decline as they are now producing more quality games that appeal to a wider audience.
Ban on Chinese-developed applications
Finally, the ban on Chinese-developed applications by the U.S. government has made it difficult for these companies to access the U.S. market and capitalize on potential growth opportunities there. Because the United States was the largest overseas market for Chinese games, with a value of $2.7 billion last year, a 15% decrease year on year. Four Chinese games, Genshin Impact, Call of Duty: Mobile, State of Survival, and Puzzles & Survival, remained in the top 20 in the United States throughout the year despite the ban.
Is there still some bright hope for the Chinese Gaming Industry?
Despite this drop, there are still some bright spots. MihoYo and Tencent Games were two of the top earners among Chinese game developers, thanks to popular offerings such as Genshin Impact and PUBG Mobile, respectively. However, it remains to be seen if these two publishers will be able to maintain their growth or whether foreign sales of their games will also start to decline.
Furthermore, the industry is still relatively new, and there is plenty of potential for growth in the future. With the global economy gradually recovering from the pandemic, it is likely that foreign spending on gaming products and services from China will increase as well.
Additionally, Chinese game developers have the potential to expand their share of the overseas market. CITIC Securities estimated that revenue from foreign sales of Chinese games could reach USD32.9 billion by 2025, more than double its 2020 forecast and triple that in 2027.
Final Thoughts
Overall, while the pandemic has had a negative impact on Chinese game developers’ foreign sales and revenue, there is still some bright hope for the industry. With global economic recovery underway and the potential to expand their share of the overseas market, Chinese game developers could be looking at better times ahead in terms of their international presence. There are also many opportunities that can be explored, such as leveraging new technologies or entering into partnerships with other countries’ gaming companies which may lead to increased revenue from abroad in future years. Let’s wait and see!
