China Lifting Gaming Console Ban: What Does it Mean for Mobile Game Development?

Following a 15-year ban, China will now allow the sale of video game consoles throughout the entire country. As The Wall Street Journal states, China’s Ministry of Culture released a statement early last week declaring that both foreign and domestic companies will be able to make and sell video game consoles anywhere in the country.
Previously, foreign gaming console manufacturers were allowed to operate in China, but only within the Shanghai Free Trade Zone. Consoles were banned in 2000, and relaxed rules were put in place in 2013.
Since then, console makers such as Sony (NYSE:SNE), Nintendo (OTCMKTS:NTDOY) and Microsoft (NASDAQ:MSFT) have started to set up shop in China, and it’s easy to see why. According to VentureBeat, analyst firm Newzoo sees gaming sales in China increasing 23 percent, to $22.2 billion, in 2015. Earlier this year, Newzoo predicted that, given the lack of consoles in China and the “exploding” market for mobile gaming, China will push down the entire market share of console gaming.
Fortune suggests that the latest change could be a boon for console makers, noting that Microsoft had a breakout first day last year when it achieved initial sales of 100,000 Xbox One consoles. That beat the company’s opening day in Japan, according to Polygon.

What about mobile game development?

The Journal points out that the lifting of the ban could open up a market of mobile gamers who haven’t previously had access to consoles, but others aren’t so sure. At the start of July, CIO cited research from Niko Partners that predicts lackluster sales for Microsoft and Sony in China in 2015. Niko believes that consoles are still too expensive for many Chinese consumers.
There are other barriers to game development in China as well. For example, CIO also notes that the country has strict censorship rules that largely prevent the distribution of violent — albeit popular — games, such as Grand Theft Auto and Call of Duty.
Currently, mobile gaming still reigns supreme. Games are often free to play, but gamers can pay for upgrades and other options. And as Newzoo has suggested, there’s “no game tradition on TV [in China] because of smaller housing and lack of a console market.” That bodes well for mobile game developers hoping to hold on to a growing market share in the country.
Still, CIO also states that consoles have been sold illegally since the start of the ban in 2000, so there’s definitely a place for consoles in China. In any case, those in the mobile game development and gaming app space will be watching for sales figures out of China from Sony, Nintendo and Microsoft.
 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.