For the past four and a half months, something very unusual has been going on in the Chinese games business.
Until this week, it was noted in public only by a handful of specialists who follow the Chinese business closely - but since March 28th this year, the country's authorities have not approved a single digital game for sale in the nation. The story gained wider attention this week, when Chinese gaming giant Tencent was forced to abort its launch of Capcom's Monster Hunter World on the WeGame digital game platform - pulling the title and issuing refunds only five days after the game's launch.
The official explanation for what's going on, with regard to Monster Hunter at least, is that the authorities received "numerous complaints" about the game's content after launch and withdrew their approval for the title. Content approval issues are common with overseas-developed games in China; some staples of western- or Japanese-developed titles are considered offensive or unpalatable by China's censors, with games being denied release for everything from relatively easily-changed asset problems (World of Warcraft famously ran into trouble for the number of skeletons in the Wrath of the Lich King expansion) through to rather more complex issues around perceived political or socio-economic messages.
"The fact that even the giant Tencent appears powerless in the face of current changes suggests the government might be willing to take a harder line in future"
This would not, of course, explain why Monster Hunter World is only the latest in a string of games to be denied approval (or denied a decision on approval) since March 28th. The broad explanation for that lies with fallout from the massive reorganisation of China's government institutions that occurred in March.
These reforms were largely seen as attempt to further consolidate power under President Xi Jinping, and one of the major changes - at least from the perspective of the games business - was the abolition of the State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) and the division of its duties between a new body, the State Administration of Radio and Television (SART), and the Communist Party of China's Publicity Department. The overall impact is expected to be that the Communist Party will take more direct command of censorship and media control.
In principle, video games are to be regulated by the new body, SART; I say "in principle" because video games, despite their enormous commercial and cultural success in China, are not explicitly mentioned in the remit of the organisation (coming instead under the broad banner of "online audio-visual contents"). Communist, capitalist, it matters not; show me a room full of politicians anywhere in the world and I'll show you a room full of old men who would need to have the very notion of video games explained to them from first principles before they could even think about including them effectively in a legislative change.
The problem, it appears, is that SART isn't actually approving anything at the moment. The Ministry of Culture is the other regulator for video games, and its approvals have continued as normal; the false start for Monster Hunter World appears to have stemmed from the game being approved by the Ministry of Culture and launching on that basis, only to have it withdrawn because the SART approval is still not forthcoming.
So the waiting game continues in the world's largest and most lucrative games market; and it's not merely the waiting, the lost revenue and the frustrated consumers that are making publishers nervous. It's also the fact that until SART starts to issue its approvals, we won't know what has caused this delay. It could be an administrative problem with the split in the department, or simply that games are falling through the cracks as duties are allocated across the new system - but given Tencent's financial and legal clout, a mere oversight seems unlikely.
"If the Chinese government has decided that certain monetisation processes (such as loot boxes) constitute addictive gambling and are a threat to social fabric, the impact will be extremely severe"
What's far more likely is that the new body is preparing for a more fundamental change, perhaps one that could seriously impact the rules for approvals. The Communist Party didn't make a power-grab for the state's censorship authority just on a whim, or simply to keep things running as they always have; the fear for any media organisation doing business in China right now must be that the ground under their feet is about to fundamentally shift.
What form that shift might take is a matter of pure speculation, but there are a few things that might point us towards the authorities' intentions. In other realms of media, censors have taken the position that the amount of foreign media allowed into the country should be limited; this is an issue which game creators have thus far worked around by teaming up with local partners like Tencent, but the fact that even the giant Tencent appears powerless in the face of the current changes suggests that the government might be willing to take a harder line in future.
It's notable that in a separate but nonetheless telling development, China has been withholding approvals from all South Korean games for some time over a military dispute (it is very deeply unhappy with some of the radar capabilities of a new missile defence system which the USA is to install in South Korea), which suggests that China is happy to use video games to bludgeon rivals economically as well as being concerned with their cultural impact.
The other recent development that's worth paying attention to in this regard, however, is less to do with culture and more to do with society. China's government has shown significant concerns over the past year or two with how some games are monetised; the authorities have sharply criticised the business model of specific games, with the state-run People's Daily notably lashing out at Tencent's Honor of Kings mobile game last June.
The concern here appears to be that monetisation of some games is causing social problems and may effectively constitute gambling - with gambling addiction being a social issue that China, like several other Asian nations, takes very seriously. Warnings of a crackdown on online games have thus far resulted in relatively soft-touch regulation; but if the Chinese government has ultimately decided that certain monetisation processes or game mechanics (such as loot boxes) constitute addictive gambling and are a threat to the nation's social fabric, the impact will be extremely severe.
The actual reasons for SART's failure to approve any games in over four months are likely complex and multifaceted - but if an internal review of how game business models are assessed and what is considered acceptable is part of that, this would be a hammer-blow for some parts of the industry. After the Netherlands and Belgium ruled against loot-box mechanisms earlier in the year, there's been something of a respite; a Chinese ruling would be the dropping of the other shoe, and this one's a damned big boot. The Chinese market has been difficult and unpredictable from a legislative and economic perspective all along; taking away publishers' most powerful monetisation tools would demand a major rethink of many company's plans and processes (though the authorities may indeed have a point on the social impact aspect).
One option this would put on the table, which many consumers in other markets might find unpalatable, is the prospect of parallel development of games with and without loot-box mechanisms or other free-to-play monetisation systems. Simply not releasing in China isn't really an option, given the size of the market - and after all, publishers have been making China-specific SKUs with different content (and sometimes with different business models) for many years.
We may see a point coming in the not too distant future where the development of versions of games with different business models to conform with different local laws and customs regarding game monetisation is as common - though by no means as easy - as the development of multiple versions for different hardware platforms.