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Xbox One, PS4 sales "disappointing" in China - Report

Niko Partners estimates that only 550,000 units of both platforms combined will be sold this year

Asian market intelligence firm Niko Partners has released a new report on the rise of TV-based gamers in China, who are expected to total around 27 million by 2019. While revenue from consoles, console games and Smart TV games is forecast to reach $654 million in 2015, rising to $3.0 billion by 2019, the Xbox One and PlayStation 4 have gotten off to a slow start since sales of consoles were legalized in China.

Niko said that legal sales of the two new gaming consoles have been outright disappointing thus far, and the firm anticipates that only 550,000 units total will be sold by the end of this year. Sales could improve still if prices are lowered and more AAA titles get approved and released on the Chinese market.

The real opportunity, according to Niko, is in set-top boxes and Smart TVs, which are predicted to overtake console sales by 2019. "Smart TV gaming has a better chance of success than game consoles because of the lower price and the nature of the casual family titles available," Niko noted. "Hurdles are getting higher quality games, including mid-core and hard-core titles, and inventing a better controller for the games to replace the TV controller."

Lisa Cosmas Hanson, Managing Partner and founder of Niko Partners, commented, "Despite China being a predominantly PC online gaming culture, Chinese who are now 26-35 years old grew up in the days of Nintendo Super Famicom consoles and are accustomed to playing games with a controller via a TV. These gamers will drive adoption of 'over-the-top' (OTT) games played on Smart TVs as well as the use of game consoles, and thus will begin the transformation of the living room to entertainment center."

Niko is selling its report for $7,000. While the TV-based gaming segment may be growing in China, it's worth noting that mobile still far outpaces it. China recently became the world's biggest market for iOS downloads, and Newzoo pointed out in a recent report that China's mobile gaming market is still showing room for growth.

Latest comments (8)

Alfonso Sexto Lead Tester, Ubisoft Germany4 years ago
Does this have to do with the price, or are the Chinese actually a lot more interested in PC MMOs and mobile F2P?
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Payton Liu Production Support Analyst, IBM China4 years ago
Despite China being a predominantly PC online gaming culture, Chinese who are now 26-35 years old grew up in the days of Nintendo Super Famicom consoles and are accustomed to playing games with a controller via a TV. These gamers will drive adoption of 'over-the-top' (OTT) games played on Smart TVs as well as the use of game consoles, and thus will begin the transformation of the living room to entertainment center.
Yes, good point. I'm one of the said generation who is at early 30s. However, I don't buy consoles or games at official stores. My generation had been through all kinds of hurdles into playing console video games, and we'd rather buy them cheaper on-line, unofficial video game outlets, or go to Hong Kong, Taiwan or even Japan to acquire our needs. I'm afraid counting on us (age around 30 generation who were with first console rush in China) to change the situation might be fruitless.

@Alfonso, well, there is no easy answer to your question, but I'll try ;-)

* The console games (along with hand held devices) were banned so long (decades) in China that most younger generations today don't even notice their existence. This created a vacuum for PC games to take advantage of, and later by mobile gaming.

* The traditional Chinese culture says "gaming your life is bad", no limited to video games though. Sorry, I don't know how to translate that one appropriately into English. But generally speaking, Chinese parents consider kids who play video games are bad and bad for their life, they should only focus on getting high marks in school. You might wonder why PC games survived? Well, consider computers are not labelled as "gaming device", and it's much easier to hide playing PC games than try to get console device hooked up with TV set without people noticing it. (PS: I think this is a critical point Western media usually ignore.)

* Steam platform is well alive in China, and Valve made partnership with AliPay (the Chinese equivalent of PayPal) that purchasing PC games are very easy in China. For whatever reason, there's no apparent censorship on Steam platform. (The cheapest GTA V version can be found here, yup, you heard me clear.) Heck, there are even local download servers set up by Valve around big cities in China, so no fence at all. (BTW: Uplay works quite well here in China, nice job!)

* As the article pointed out, you can't get AAA games or attractive games released in China. Why would people get interested in consoles if all they see are handful of old games every time they go to a store? (supermarket, electronic stores, etc.) What's the selling point the consoles have over Steam, iTunes or Android market? (Google Play banned in China, if you didnt already know that.)

Additional notes: For XBOX ONE and PS4 to win over people for living room media center place, they have to offer something that work in China. You have to partner with local video streaming service providers and social network providers. Not to mention other local set top box competitors. Netflix, YouTube, and all don't work here, China is both a close and open (unofficially...) market at the same time. Your major customers mostly have no idea about video game consoles, and you should be careful to sell them as gaming machines to Chinese parents.

As much as I want them to succeed in China, I can't shake the feeling that this might become another hard learned lesson for console makers (the 2nd time for Sony)...

Edited 2 times. Last edit by Payton Liu on 2nd July 2015 11:45am

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Christopher Garratty Associate Counsel, Activision Blizzard4 years ago
@Payton: Really interesting comment. Thanks for sharing.
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Greg Wilcox Creator, Destroy All Fanboys! 4 years ago
You'd figure maybe Microsoft and Sony would do that sort of research provided so well by Payton BEFORE spending time and money trying to enter a market so set in its ways.
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Claas Grimm CRO, Red Hot CG4 years ago
Niko said that legal sales of the two new gaming consoles have been outright disappointing thus far
It is important to note that we are talking about legal sales. The Chinese versions of both consoles are more expensive than the international versions, the Xbox only runs a handful of officially sanctioned games. In addition to that, almost every shop sells grey imports openly that are cheaper and available since day 1 of this console generation. In other words, most Chinese won't buy official Chinese consoles and grey import sales figures do not show up in the "legal sales".

There are no official statistics but the amount of units in Chinese households is probably a multiple of the figure reported here. I believe that Chinese content for consoles is fairly neglected at this point while it may very well be a good opportunity for local game developers. Especially since the competition on mobile is extremely fierce in China. There is a reason why there are currently several attempts by large Chinese manufacturers to create their own console.

The official market entry is the right thing to do in my opinion for Sony and Microsoft. It is a step for potentially full distribution in the next generation. Of course it requires the Chinese government does remove or lower the remaining censorship mechanisms in order to protect a local business.

Edited 1 times. Last edit by Claas Grimm on 6th July 2015 10:46am

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Payton Liu Production Support Analyst, IBM China4 years ago
@Claas, ah yes, the grey market (unofficial shops). Before the internet boom, we had to rely on them for console video games that came through border between Hong Kong and Shenzhen.

However, there is problem for this market - common people (who don't know home consoles, the targeted customers by both companies) have no knowledge of it. My home city - Shenzhen - is the most expensive city in China (its average housing price just beat New York City this year), which should be an ideal market for video game consoles, considered people have more spare money to spend than most other parts of China. Whenever I visit Sam's (Walmart's premium super center, annual club fee required) XBOX and PS4 section, it never gets crowded even at a holiday weekend. As I chatted with the sales representative once, he's got the same concern - no games to attract people. He agreed with me that people did buy here generally have no idea about grey market, otherwise they wouldn't come here in the first place. (as the Japanese version of XBOX ONE is embarrassingly cheap in Hong Kong) The only saving grace for XBOX is the old Forza Motorsport 5. PS4's games are even less attractive, only Koei's slap and chop game - Dynasty Warrior can get some children interested. (that game just doesn't have the pretty graphics to get people hooked in)

The official shops (Walmart, electronic stores, etc.) are not allowed to sell unreleased games in China. The grey market shops generally don't have good locations to sell than the shopping centers and super markets, so most of them have to go on line. Yeah, it would be nice to have those figures. And my best guess is both Microsoft and Sony have them at hands, XBOX Live and PSN is the answer. They surely can analyze logged in users from China, then filter out who's playing unreleased games. They certainly know if the consoles are the official Chinese version by checking serial numbers (or whatever identifications).

But to count on government to remove or lighten censorship, you might be up for an empty hope. The situation keeps getting worse since 2012 for free market progress. The government is tightening grips on all aspects of the society, but that is another topic I don't like to talk about while I'm in China. I think you will understand. ;-)

Edited 1 times. Last edit by Payton Liu on 6th July 2015 1:20pm

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Claas Grimm CRO, Red Hot CG4 years ago
@Payton, I don't know the exact situation in Shenzhen - you have Hong Kong around the corner so it might not even matter so much. But - in Shanghai (where I live) the grey imports are available everywhere, every electonics mall sells a large variety of games and the consoles, I don't live in the city center but I have 2 shops in walking distance from which I picked up Mortal Kombat, GTA V and Bloodborne - all "banned" games. Grey imports are so openly available and on display, you wouldn't know there is a "ban" in place. Just like you said...
I don't buy consoles or games at official stores.... we'd rather buy them cheaper on-line, unofficial video game outlets, or go to Hong Kong, Taiwan or even Japan to acquire our needs.
The big (foreign) electronics markets only sell official ware, but who buys from them anyway. The the biggest retailer of them all: Taobao - has almost everything in stock. I am sure that Taobao alone sells more grey imports than all other official retailers combined.

I do not have official numbers to back me here but I know grey import figures from other comparable hardware. Take it as my personal oppinion but I bet there are easily 3 million current gen consoles in China, which translates into a global market share of just under 10%. This being said, even if the current market-entry efforts of MS and Sony do not translate directly into sales their aim must be to reach this significant market.

As for import limitation and censorship, I agree it is not looking good at the moment in general. I am hopeful for games, I hope for similar trends as with the movie industry regulations. But yes, that is a different discussion altogether. Economically it comes down to 3 scenarios:

a) Crack down hard on all online and physical sales. Very unlikely and pointless.
b) Leave it as is and miss out on a lot of sales and corporate tax.
c) Slowly open up. Sony and MS gain the ability to market directly to consumers and increase sales. The state gains tax money. This scenario becomes more likely as more Chinese developers, e.g. like Snailgame, bank on console game production for the Chinese market.

Edited 2 times. Last edit by Claas Grimm on 7th July 2015 5:55am

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Payton Liu Production Support Analyst, IBM China4 years ago
@Claas, thanks for your further inputs! It's quite good to know the different situation in Shanghai, whereas Shenzhen is more in scope with Hong Kong. I wonder if some institutions may do an investigation in all major cities (provincial cities and wealthier cities) in China for grey markets, would be such an interesting and informant read.

As the install base goes, it would be very helpful to publishers and developers if Microsoft and/or Sony can share their internal figures. As I said before, it would be easy for them to gather the information from XBL and PSN. If this hasn't been done already, I wonder why they bothered with China.

I agreed with you that scenario C is the rational choice for economy gains. But as you know, China government usually is more concern with political issues rather than economical problems. This just happened again with the current stock market disaster that the government (who initialized this fake bull market since last year) is trying to calm people's anger by intervening the market when doing nothing is more in an economic sense. (Historically speaking, all those who tried didn't work out well, i.e. US and Japan in the 1980s)

Open up the console market to the mass public for money or keep control? So far we haven't seen the former happening. Officials are busy with the stock market problems right now, so we won't be able to see any progress for console market any time soon.

Edited 2 times. Last edit by Payton Liu on 9th July 2015 6:52am

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