China's gaming market, valued at CNY302.96 billion (US$41.8 billion) in 2023, presents a lucrative opportunity that major Japanese game companies like Nintendo and Sony are eager to tap into with their consoles.
However, despite the market's vast potential, these firms struggle to make significant inroads due to stringent government regulations. These restrictions have resulted in most of their game software failing to pass approval, thereby stalling console sales and limiting their market penetration.
Huge gaming market out of reach
According to the 2023 China Gaming Industry Report by the China Audio-Video and Digital Publishing Association (CADPA), the actual sales revenue of China's gaming market increased by 13.95% year-on-year, with a total of CNY302.96 billion.
The number of gamers grew by 0.61%, reaching 668 million.
However, Nikkei has revealed Sino market's massive potential has yet to be translated into substantial profits for the Japan-based video game giants.
Only around 70 game titles from the Nintendo Switch and PS5 game library have reportedly received approval from Chinese authorities, accounting for a mere 1% of the available games. This limited availability has reduced the appeal of these consoles and subsequently hindered their sales.
Nintendo and Sony have been in China for several years. Nintendo, in partnership with Tencent, started selling Switch consoles in China in 2019. Sony Interactive Entertainment (SIE), Sony's gaming division, established a subsidiary in China in 2014, introduced the PS4 in 2015, and launched the PS5 in 2021.
However, both consoles have struggled to achieve significant sales, partly due to the limited availability of games, reducing the attractiveness of these consoles.
Unapproving games
China's regulatory environment for game content remains strict, with no signs of loosening. For example, one of Nintendo's flagship games, "The Legend of Zelda," is unavailable in China due to regulators deeming the presence of skeletons in the game inappropriate.
Statistics from China's National Press and Publication Administration (NPPA) indicate that, so far, only around 30 imported games for the Switch and about 20 locally developed games have been approved. For the PS5, only 10 imported games and 8 locally developed games have received approval.
In contrast, the number of available games outside of China for these consoles is astronomically larger. For instance, there are about 1,900 Switch titles available in Japan and around 2,300 in the Americas.
Nintendo has stated that the unpredictability of the Chinese market makes it challenging to increase sales in the short term. Currently, revenue from China accounts for less than 10% of Nintendo's total revenue and is categorized under "other" regions.
Additionally, mobile gaming remains highly popular in China, posing as a challenging competitor of console-focused companies like Nintendo and SIE. In 2023, China's mobile gaming sector, also known as the mobile game market, generated CNY226.9 billion in sales, a year-on-year increase of 18%, accounting for 70% of the total gaming market.
