As the largest games market in the world, and a space thoroughly dominated by mobile, China is not a market that can be easily ignored.
However, it's also not an easy market to enter, let alone successfully compete in as a Western developer. Ranked at No.58, Clash Royale is technically the highest-grossing game from a non-Chinese company but, given that Tencent owns a majority stake of developer Supercell, the highest-grossing entirely Western game is actually closer to No.70.
Regardless of how intimidating the Chinese market may appear, with even giants like Supercell failing to crack to the top ten, developers and publishers with aspirations of a truly global business need to be thinking about how to tackle it sooner rather than later. Not only does China account for nearly one third of the global games market, it's also the fastest growing with a 17 per cent increase year-on-year. Mobile alone accounts for 61 per cent of its $38 billion annual revenue, and is expected to reach 70 per cent by 2020.
But the innate profitability is hampered by its complexity; from cultural and regulatory differences through to competition, media, and distribution, China is highly fragmented and difficult to crack. That said, for Western companies willing to put the work in, China is an open goal.
German mobile publisher Flaregames has learnt this recently; having taken several games to China and -- after plenty of testing and a few false starts -- has begun to reap the rewards. Speaking with GamesIndustry.biz at Digital Dragons in Krakow recently, Flaregames' vice president of marketing Mickael Bougis discussed the challenges of breaking into to China, and how others can best find success.
There are, Bougis says, four major obstacles that can impede a Western developer in China: culturalisation, regulations, fragmented distribution, and access to the media.
Culturalisation is the obvious one, Bougis explains. From art style and localisation, through to monetisation and different SDKs, the gaming culture gulf between China and the West couldn't be wider. When Flaregames took Dawn of Steel to China as part of a publishing deal with NetEase, the developer spent 18 months rebuilding the game to make it fit with the publisher's very specific requirements.
If you ignore 30 per cent of the market, you cannot claim you are a global publisher anymore
Questions surrounding monetisation and player behaviour, for example, have a different answer in China where users are more accepting of 'pay-to-win' titles than your typical Western gamer. Even so, an increased focus on ad revenue is recommended as the distributor cut of in-app purchases is often between 50 and 70 per cent.
While culturalisation is important, it can be handled with adequate prior planning and consideration; fragmented distribution on the other hand will always be a headache. Although historically dominated by Android, iOS has begun gaining traction in China, securing 27 per cent of the quarterly market share, spurred on by the popularity of the iPhone X -- currently the top smartphone in the country. This presents an unprecedented opportunity for developers to make an impact in China, without the overheads of dealing with the fragmented Android market.
"When you have your iOS build, it's going to be much easier to flip [to China]" says Bougis. "It's the same tech architecture... It works in China -- assuming it's localised -- then you just go into your developer console and you press some buttons and technically it works.
"I'm not saying your backend is going to work, that's a different story, but at least on the front and side, all of that works. It's not the case on Android; you need to take your build and remove everything Google Play from that, and then you need to integrate Tencent payment meta etc. You have a lot of work to do on your frontend before you even think about you backend."
Filling the space left by the absence of Google Play in China are around 400 different app stores operating independently; unsurprisingly, Tencent has the dominant share with around 25 per cent, followed by NetEase. Bougis suggests releasing on anywhere between 20 and 30 stores, but there's a caveat.
"Think about what you're doing with Apple and Google right now, and multiply that by 20, 30, 40, 50," he says. "And it's not just a pain when you release a game, but everytime you push a build out you have to push to the different stores. So if you think about your team and how you're going to scale it, that's pretty scary."
You need to be aware of all these choices that will make your life more difficult in China, and take that into account. Don't fall into those traps
All of these challenges are only exacerbated by tighter regulations. and each game requires a licence from both the Ministry of Culture, and the State Administration of Press, Publication, Radio, Film and Television (although this is likely to change given the Chinese government announced it would abolish the SAPPRFT back in March).
Additionally, lots of standard middleware such as Google Cloud is not available, investment and royalty payments are more complicated, and it is forbidden to store data for more than 500,000 users outside of China.
But the biggest problem, Bougis suggests, is the lack of access to media. With no Facebook, you're instantly missing out on a huge traffic driver and it's almost impossible for a Western developer to buy media or advertising from a Chinese platforms. Ultimately, this leads to a highly inflated market with Western developers restricted to buying media from Western sources like Unity Ads or AppLovin, which quickly over inflates the cost per install.
Considering this, there are five real options for approaching China, Bougis explains. First is to sign with a large publisher like Tencent or NetEase -- but keep in mind, these firms are looking for something very specific; they will often sign ten or 20 games only to drop all but the most successful titles after a few weeks.
Signing with a smaller publisher is also a valid option, as it is more collaborative than with the likes of Tencent, but you're unlikely to break the top 500, or even 1,000 games this way. Alternatively, you could just license the game and hope for some backend royalties but this this too isn't an especially profitable option.
Going through the regulation yourself and releasing on a few Android stores is a possibility but only if your plan is to build a company in China -- otherwise it's not advisable, says Bougis; any company set up in China must be 100 per cent Chinese owned and variable interest entities don't qualify for licenses issued by MOC and SAPPRFT. However, self publishing and releasing on iOS is "pretty easy and surprisingly successful."
"That's probably the first thing to do for a small studio... test the water on iOS," Bougis says. "If I were to have a five-person studio in front of me right now that is self publishing on iOS, I would say release it in China and take it from there. See how it goes, learn about the market...
"On Android, it's clearly not realistic to go there yourself. Even a company like Flaregames is partnering with YeahMobi to do that. The size of the biz dev team you need to handle hundreds of stores, plus... the people you need just to handle the regulation process, it's not really realistic even for a studio of 20 or 25 people."
Protecting your IP is very difficult in China so probably your best protection is to go same date release
For developers looking to take their game to China, it cannot be an afterthought. Designing a game exclusively for the Chinese market is not advisable, but ignoring it entirely is even worse, Bougis says. By keeping China in mind from the very beginning, it's possible account for tech blind spots, restrictions on assets and mechanics
-- everything from Russian tanks to controlling time -- and different consumer behaviour.
"You need to be aware of all these choices that will make your life more difficult in China, and take that into account," says Bougis. "Don't fall into those traps, and then take it from there. Consider China for what it should be, which is one of your key markets."
Unlike your other key markets of the US and Europe, however, there is no established test market for China. While a soft launches in regions like Canada, Australia, Scandinavia, or the Netherlands is common tactic, China is unlike any other market.
"We still have to figure out as an industry what is the right testing market for China," says Bougis. "Some people are trying to release on one [smaller Android] store only... Some people treat iOS as the soft launch version, but with iOS becoming a bigger and bigger market, it's becoming bit more of a shame to use that huge market as a soft launch market.
"So generally we have to figure that out, and historically speaking that hasn't been in the culture of the Chinese to test. If you look at the way Tencent or NetEase are, they are going full, day one, multi-million marketing budget. They don't really test. They are much more in the business of taking 20 games, throwing them out, and only sustaining with the three or four that really make sense. So that's a big question for us and Western developers: how are we going to test, how are we going to soft launch in China."
You look at the way Tencent or NetEase are, they are going full, day one, multi-million marketing budget. They don't really test.
Releasing on iOS in China simultaneously with your other launches is also key to finding success in the market. Not only can it help keep you afloat while you arrange multiple Android releases, it can help combat piracy.
"Protecting your IP is very difficult in China so probably your best protection is to go same date release," says Bougis. "I see a lot of people that are releasing their game into China six months or one year after, when you can expect by the time your game is there -- if it's successful in the West -- it will have been copied there and you'll be fighting someone on the market that has the first move."
Of course, ignoring the market entirely is technically an option, Bougis says, but certainly not one he would recommend given than one of Flaregames more successful titles -- Nonstop Knight -- earns 46 per cent of its iOS revenue from China alone.
"As an industry, we always speak about global publishing and all the Western publishers are really presenting themselves as global, but we don't really have a choice other than being successful in China," says Bougis.
"If you ignore 30 per cent of the market, you cannot claim you are a global publisher anymore. I would say the next two or three years will see the difference between true global publishers or publishers that are becoming much more specialised to the West."