05 June 2020

Enter the Dragon: How China Mobile Gaming Market Got Practically More Complicated

This article was written by Mark Schaub and Tom Shi (Shi Wei)

 

Back in July 1, 2016 the PRC authorities required newly launched mobile games to go through an approval process prior to launching online pursuant to the Notice of the General Office of the General Administration of Press, Publication, Radio, Film and Television on the Administration of Mobile Game Publishing Services (“Mobile Game Publishing Notice”).

Obtaining the gaming publication number became an important and necessary hurdle for companies wishing to release mobile games in China. Foreign mobile game publishers were able to circumvent the publication approval requirement as Apple/Android (Google) Store did not strictly enforce the Mobile Game Publishing Notice for foreign game developers. However, times have changed as Apple/Google Stores have recently issued a notice to App developers stating that a gaming publication number must be provided to App Store for any paid games or games that contain in-app purchases.

Applying for the gaming publication number is a time consuming process and also entails strict censorship of content. Unlike many Western countries, China does not have a rating system for games. Any content that is not suitable for children such as gambling, horror, nudity is forbidden. The developer will be required to modify such content and re-submit to obtain a gaming publication number.

Value-added telecommunication license such as B25 ICP License is a mandatory requirement for any company wishing to obtain a gaming publication number. We note that currently wholly foreign owned enterprises (“WFOEs”) cannot apply for an ICP License as it is a restricted license under telecommunication sector according to Special Administrative Measures for Foreign Investment Admittance (Negative List) (2019 Edition). Although ICP Licenses can be obtained by Sino-foreign joint ventures, we note that the authority rarely issues such license to Sino-foreign joint ventures in practice. As a result, many foreign gaming company (content providers) license their games to Chinese publishing houses such as Tencent or Netease as they are more in a position to comply with the authority’s requirement and they have a dedicated government relation teams to handle potential issues in relation to obtaining a gaming publication license.

The co-operation can be in the form of buyout (e.g. the Chinese publishing house buys the publishing rights in China) or in the form of a profit distribution (e.g. the profits are shared between content provider and publishing house). Nintendo’s recent co-operation with Tencent on the release of Nintendo Switch in China is a sign that another gaming giant has decided to enter the China market and is doing so by teaming up with a strong partner.

The move by the App stores has closed doors on many App developers wishing to expand into the Chinese market via this channel. The practical difficulties of obtaining a gaming publication license likely means that working with a strong Chinese partner to license the game is likely to be an increasing option for many gaming countries to enter the Chinese market.


If you have any queries please feel free to reach out to Mark Schaub [email protected] or Shawn Hu [email protected] or Tom Shi [email protected]

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