Chinese gaming companies increase footprints in Southeast Asia as their domestic fortune fade
Chinese gaming developers are intensifying their commitment to the international market, particularly Southeast Asia, for the next phase of growth as their domestic companies struggle with the more difficult Chinese market.
Thirty-nine of the top 100 global mobile games by revenue, according to a report from mobile app market intelligence company Sensor Tower, were developed by Chinese gaming companies.
Top 30 global revenues of Chinese mobile companies in July, Credit: Sensor Tower
Tencent retained its position as the China’s highest-earning mobile game company in July followed by NetEase and Genshin Impact’s developer miHoYo.
In terms of revenue generated from Google Play and Apple’s iOS App Store, Tencent’s PUBG Mobile and Honour of Kings took the top two spots.
Additionally, Tencent also benefited global e-sport events like Peace’s new season SS19 and new titles such as LoL Esports Manager.
While the majority of Chinese game companies will still primarily concentrate on the domestic market, increasingly prosperous businesses are now using their experience in China to enter and stimulate comparable markets abroad. Special attention is given to Southeast Asia.
Startups like Moonton, which ByteDance purchased in March of last year, have already seen user spending rise by double digits annually due to the phenomenal success of its top-grossing game Mobile Legends: Bang Bang. Since the game’s launch in 2016, Southeast Asia has contributed 61 percent of its total revenue, accounting for a significant portion of the game’s earnings.
Mobile Legends: Bang Bang is the top grossing MOBA in Southeast Asia, it even outmatch Tencent’s blockbuster Honor of Kings.
Malaysia is the best-performing market for Mobile Legends: Bang Bang among all the nations in Southeast Asia, according to Sensor Tower, with players there contributing 17% of the total revenue, followed by Indonesia with 14%.
Similar to Moonton, Tencent has a significant presence thanks to investments in some of the top game studios and tech start-ups in that area. In order to take advantage of Southeast Asia’s enormous potential for growth, other startups are also expanding there.
Singapore has been chosen as a major international hub for Genshin Impact developer miHoYo, serving as a significant location for global distribution and operations. The company recently disclosed a plan to increase employment for its metaverse division, known as HoYoverse, by hundreds in Singapore by the end of this year.
The rapid rise of SEA as a major force in innovations has acted as a motivator for Chinese gaming companies to succeed abroad. A wide range of businesses are represented in the new economy startups in the area. Livestreaming, webcomics, gaming, and other forms of online entertainment with a consumer-to-consumer focus have all experienced explosive growth as a result of people spending more time at home due to the COVID-19 pandemic.
The fiercely competitive domestic market and tightening regulations are additional factors.
Despite the fact that the Chinese government lifted its eight-month ban on new video game licenses in April, the approval rate has significantly slowed since last year. This year, neither Tencent nor its domestic rival NetEase have received a single new license.
According to a report co-authored by the Game Publishing Committee of the China Audio-Video and Digital Publishing Association, the Chinese gaming market is experiencing a downward trend with the first revenue decline in 14 years and a declining user base.
For the first time ever, both revenue growth and user base have decreased in China’s game industry.
The total gaming market revenue in China fell 1.8% to 147.7 billion yuan ($21.8 billion) in the six months that ended in June, marking the first decline since the data started to be released in 2008. At the same time, the number of gamers decreased slightly to 665.7 million at the end of June from 668 million at the height of the Spring Festival last year.
For the first time ever, revenue from mobile games—which makes up 74.75 percent of the overall revenue—declined.
In addition to dealing with a shift in consumer preferences brought on by easing lockdowns, Chinese game publishers and developers are also facing rising corporate costs, decreased consumption, and a shortage of hit tiles.
The most recent evidence of this came from Tencent, the largest gaming company in China, which reported quarterly earnings. Tencent’s profit fell by 51 percent year over year to 23.4 billion yuan in the first quarter. The largest source of revenue for Tencent, its online gaming operations, generated 43.6 billion yuan in revenue.
While competitor NetEase reported a lower-than-anticipated quarterly profit, online margins decreased to 72% from 90% a year ago.
With extremely high rates of internet and mobile phone penetration, China has a very high tech-literate population. Due to the Chinese government’s support for these policies, venture capital investment in China has shifted away from consumer-oriented businesses like the online gaming sector and toward B2B and artificial intelligence companies. Semiconductor, advanced manufacturing, AI, robotics and automation, new materials, and industrial software are a few of the industries that stand to gain.