Beijing, China – Before China started cracking down on video games, Zhang “Yvan” Yifan had no shortage of new titles to play.
These days, Zhang and his friends are struggling to find games that pique their interest, after authorities implemented a nine-month freeze on licensing amid concerns about rising addiction in the most populous country in the world.
So far this year, the Chinese market has only released 105 new games, down from 755 titles in 2021 and more than 9,300 in 2017.
“Most of my friends like to play competitive first-person shooters,” Peking University student Zhang told Al Jazeera. “But we can’t find a game that we all want to play these days. Having less games to choose from is really sad for me.
Zhang’s frustration is reflected in falling sales across the industry.
Video game revenue in the first half of 2022 fell for the first time since data became available in 2008, down 1.8% to 147.8 billion yuan ($21.9 billion), according to the industry figures released by the China Audio-Video and Digital Publishing Association and the China Gaming Industry Research Institute. Excluding foreign sales, revenues fell 4.25%.
China’s slowing economy under “zero COVID” has compounded the sector’s woes, with many young people finding they have less money for non-essential purchases such as video games.
The world’s second-largest economy barely avoided contraction last quarter, growing just 0.4%, as authorities continued to roll out tough containment measures to control the spread of COVID-19.
In June, youth unemployment reached 19.3%, the highest level on record.
For Jon, a 29-year-old Shanghai resident who often plays mobile games such as Honor of Kings, tough economic conditions have forced him to curtail his hobby.
“I spend less on games now than before, although I earn more now than in previous years,” Jon, who asked to be referred to by his English first name, told Al Jazeera.
“It’s because I’m worried I’ll have to save more in these uncertain times because I could be quarantined or unemployed.”
Free-to-download games have not escaped the crisis either. Popular mobile titles such as Fate/Grand Order and Azur Lane rely on in-game purchases made by gamers trying to get ahead of their peers to earn money.
“The economy and the job market are really bad,” Wang Liang, a 22-year-old university student in Beijing who loves first-person shooters, told Al Jazeera.
“So most gamers like me will inevitably have less disposable income to spend on games.”
The current difficulties of the sector follow an even more turbulent year 2021. As part of a broad regulatory crackdown on the industry, Beijing has introduced time limits for underage online gaming and real-name verification rules to prevent anonymous in-game purchases.
Although the end of a nine-month freeze on new titles in April gave the industry a glimmer of hope, the number of releases was a trickle compared to previous years.
The two biggest domestic players, Tencent Holdings and NetEase, which together account for around 60% of the market, and overseas publishers have yet to approve the release of a single title.
“Although several dozen titles have been approved, these resourceful gamers who understand the Chinese gaming market and gamers’ tastes very well have not been able to release new titles,” said Nir Kshetri, professor of economics at the University of North Carolina at Greensboro. who has researched China’s gambling industry, told Al Jazeera.
A once thriving industry
The declining fortunes of the industry mark a sharp reversal for the once thriving industry.
In 2017, China became the gaming capital of the world thanks to popular smartphone titles such as Honor of Kings and Fantasy Westward Journey, taking nearly a quarter of the $101.1 billion global market, according to research by venture capital firm Atomico.
Despite regulatory and economic challenges, China’s gaming market generated overall revenue of 296.5 billion yuan ($46.6 billion) in 2021, up 6.4% from the previous year. previous year, according to official government data.
In the same year, China’s esports sector was worth around $403.1 million, making it the largest market in the world, according to research by Niko Partners.
Some industry figures see this strong foundation as reason to be optimistic about the future.
The co-founder and COO of a Tencent-owned games studio, who spoke on condition of anonymity, said tougher regulation was needed and the easing of the license freeze was a source of hope.
“There are still many ways to drive the market,” the co-founder told Al Jazeera, pointing to in-app purchases and advertising, greater efficiency in production, and emerging technologies like virtual reality and the metaverse like potential solutions.
He downplayed the negative effect of the economy on the industry’s outlook.
“Less disposable income means people will be more cautious about spending on games. But that doesn’t necessarily mean they’ll spend less on games,” he said.
“Players will be more and more demanding, so low-quality games can’t make money as easily as before. Only high-quality games can encourage players to keep paying. Therefore, companies game companies should follow trends, focus on improving game quality, create more high-quality content, and explore more monetization opportunities.
Others suggest the industry will need a significant period to recover.
More than 14,000 gaming-affiliated companies shut down during the first six months of the licensing freeze, according to a report in the South China Morning Post in January. Many other firms in adjacent sectors such as merchandising, advertising and publishing also suffered heavy losses during the period.
“Chinese developers are likely to face significant challenges to monetise their games until the ecosystem is rebuilt again,” Kshetri said.
In the meantime, frustrated gamers like Zhang can only wait in hope for a loosening up of the government’s grip on the sector.
He also hopes that the current turmoil will give the industry a necessary shake-up, ultimately leading to better quality games.
“The most important thing for multiplayer competitive games is the game environment, even more so than the game content, I think,” he said. “So if the game makers can give a better environment to the player, that will definitely make them happy again.”