China’s open gaming-console market may not mean much for Microsoft and Sony
The Chinese government is stripping away its last restrictions on the sale of video game consoles, but the action is unlikely to significantly boost the fortunes of dominant manufacturers Microsoft and Sony.
Instead, the removal of a 15-year-old ban on console sales actually could intensify competition in China for Microsoft’s Xbox and Sony’s PlayStation.
Xiaomi, Baidu, ZTE and other Chinese technology companies are now free to position their own entertainment devices more as gaming consoles. That’s because a policy change confirmed last week by the Chinese Ministry of Culture opens up all of the country to the manufacture and sale of consoles, whether by domestic or foreign companies.
“This is as much about supporting local industry as it is about opening the market to international players,” said Piers Harding-Rolls, a London-based video games analyst for consulting firm IHS. “What the Chinese state is saying to local technology companies is that consoles can be built and distributed within your own existing factories and plants.”
For the last couple of years, console makers have had to operate within a set perimeter of Shanghai. Microsoft and Sony eagerly moved in. The Xbox One hit stores last September, and the PlayStation 4 arrived earlier this year.
China has more than half a billion gamers, but Harding-Rolls said he expects the two consoles combined to reach no more than 700,000 boxes sold by the end of the year.
That’s because computer and smartphone gaming are far more prevalent in China. The lack of televisions in homes, the high cost of consoles and an affinity for free-to-download smartphone games hamper the console market.
Above all, there’s heightened censorship of console games compared with mobile games, limiting the number of titles available and thus their appeal. Worries about the negative psychological effect of video games is what had led to the console ban.
“The constraint on the games catalog, if that’s unchanged, that’s not an excellent value proposition for Chinese consumers,” said Lewis Ward, a video game industry analyst at research firm IDC. “I’m still skeptical we’re going to see a dramatic increase over the next year because it’s been a slow ramp-up.”
Microsoft and Sony must find a way to get their exclusive titles approved to spur demand, he said.
But the Chinese companies could make some headway. Many, such as smartphone maker Xiaomi are already well-ingrained in consumers’ lives, giving them a jump-start in trying to be a part of the living room too. Through local equivalents of an Amazon Fire TV or a Roku, Chinese companies are now free to offer stronger gaming options alongside online video streaming.
“Previously, access to overseas video content was a key selling point, but that’s been clamped down on,” Harding-Rolls said. “They are looking at other content that can sell their product: Gaming is an opportunity.”
Sony said Monday that it’s “committed to” reaching “as many Chinese users as possible,” and a Microsoft spokeswoman said “the future is bright for gaming in China.” Nintendo said it’s “studying the developing situation.”
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