Critical Intel

Critical Intel
Lifting China's Console Ban: The Bigger Picture

Robert Rath | 10 Oct 2013 12:00
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This is especially true because the ban is blatantly ineffective-consoles and games smuggled in from Hong Kong and Macau (which have separate legal systems that don't include the ban) are readily available on the grey market. The trade is so open that shops display banned games in their front windows. Even popular culture has caught onto the gag. The 2011 Chinese film Lee's Adventure, for instance, involved the protagonist traveling through time via an illegal Xbox 360. In the film's climax, a police SWAT team breaks down the hero's door and surrounds him with machine guns as he zones out to an FPS. It's hard to read the scene as anything but satirical, and it demonstrates how the console ban has become little more than a joke. Given the ongoing embarrassment about the ban's triviality and lack of enforcement, it's understandable the government would decide that the policy isn't worth the headache. However, the ban has been in place so long at this point that it may have actually been more effective than anyone ever realized. After living a dozen years without the PS3 and Xbox 360, companies may have a hard time convincing Chinese consumers that they really need the PS4 and Xbox One.

While the console ban was originally intended to stop young people from "wasting their lives" in front of screens, it accidentally served as a form of de facto trade protection. Without foreign consoles as competition, Chinese game studios were able to form their own thriving industry on models that took advantage of the market's strengths and weaknesses. Because consoles weren't available and PCs are too expensive for many consumers, studios tailored games for internet cafes. Since piracy is an ongoing issue in the market, many focused on subscription-based online games, free-to-play models and microtransactions. Others cracked the mobile market that's taken off since smartphones became big in the last few years. By one estimate, China's game industry generated $9.7 billion in 2012, and only 0.1% of that was from dedicated gaming hardware. Basically, Chinese gamers aren't accustomed to paying $60 for a game upfront, not to mention dropping a paycheck on a console. While that may change in time, especially with the lure of a shiny new gadget-after all, Chinese consumers love status symbols like iPhones and Louis Vuitton handbags-companies will need to either adapt to local tastes or focus on changing consumer habits. Even then, manufacturing consoles in the Shanghai FTZ and selling them in China may be an uphill climb.

While the big three could avoid Shanghai's high manufacturing costs by shipping assembled components to the city and only adding a single part there, there are other problems as well. First of all, Chinese studios are in the best position to make games that appeal to the local market-it's doubtful a culturally appealing game like Age of Wushu would come from a foreign studio, for example. But even putting aside the sociological aspects, there's the simple problem of logistics. China Daily reporter Eric Jou wrote an excellent editorial for Kotaku laying out the many pitfalls console manufacturers might face. China's regulatory policy toward games is still a mess, Jou points out, meaning that getting a console certified for release may be a slow process. (According to Jou, seven different agencies claim videogames as part of their purview.) In addition, he's unsure how the internet infrastructure will hold up-especially given the Great Firewall-and how badly cheap bootlegs would cut into revenue. Regardless of that, he asserts, the whole question is academic anyway, since the government still hasn't published any regulations about how any of this will work.

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