Niko Partners, provider of high-integrity market intelligence on the Chinese and Southeast Asian digital games industry, published its Top 15 predictions about the 2017 digital games industry in China, Indonesia, Malaysia, Philippines, Singapore, Taiwan, Thailand, and Vietnam.
1. More than 500 million will play mobile games in China this year
The number of mobile gamers continues to grow in China, as does revenue per paying user. China’s revenue from mobile games will rise this year, but at a slower rate than in 2016. Mobile games are becoming more complex and immersive. We forecast Chinese mobile games revenue to hit $8.3 billion in 2017. Note: Chinese government data on mobile games revenue includes domestic revenue plus revenue from exports of Chinese mobile games, whereas Niko’s reflects only revenue generated in China.
2. eSports will drive use of Internet cafés and PC online games in China and SEA
Increased investment into Internet cafés has sprung from gamer demand for a social and eSports friendly environment to play and compete with each other. eSports enthusiasts both watch live-streamed tournaments and play the competitive games just for fun, pushing revenue for the games and the competitive tournaments higher.
3. Tencent will face heavy competition from NetEase in China for mobile games
Tencent dominated the China mobile games market in 2016 with around 50% market share, but NetEase’s mobile game revenues grew by more than 2X to quickly chase Tencent for the top spot. NetEase has a number of mobile hits including Fantasy Westward Journey, Onmyouji and New Ghost. We expect NetEase to maintain the #2 spot in the market and once again grow faster than Tencent.
4. The number of eSports enthusiasts in China will exceed 200 million in 2017
eSports is becoming more popular than ever in China. 2017 will see the introduction of an official eSports degree in colleges by China’s Ministry of Education and we expect to see more companies investing in eSports tournaments this year. Mobile eSports will see huge growth this year driven by core titles like King of Glory and casual titles like Battle of Balls, both of which are being played by 75 million users per day.
5. VR cafés and experience zones will be important for consumer VR use
2016 became “year one” of virtual reality in China, due to the fact that the sector finally truly started to grow. We estimated that China’s VR hardware market size hit $300 million in 2016 with mobile VR being the unequivocal leader in terms of hardware unit sales. VR games have not yet drawn the attention of mainstream consumers, and developers are trying to catch up to the demand for VR gear. Meanwhile, VR cafés and experience zones throughout China will allow gamers to try VR without the investment in high-end hardware, and when the games start to pour into the market demand will be there already. Steam (as the content distributor) and HTC (as the developer of Vive Cafés) are the current beneficiaries of demand for VR cafés.
6. China’s government will continue strengthening gaming industry regulations
China’s SAPPRFT introduced new regulations in 2016 which required mobile game developers to require games to be approved and acquire a version number in order to publish games in the app store. These new regulations have gone into effect this year and are now being enforced by all app stores. There are plenty more regulations in the pipeline for 2017 and now more than ever it is crucial for game developers to understand all these rules and regulations before entering the China market.
7. Pan Entertainment IP to drive growth in 2017
Pan Entertainment has been a growing trend over the past few years and we expect this trend to continue through into 2017. Games are now having tie-ins with TV shows, movies, books, comics and more. NetEase has already announced that they’ll be developing a movie based on their hit mobile game Onmyouji and Tencent is developing an anime around an eSports game. It is now common to hear about a partnership between a Chinese and US-based movie studio.
8. eSports will be the de-facto national sport for many Southeast Asian nations
The evolution of eSports in Southeast Asia has brought about cult-like status for pro gamers and teams, and enthusiasts are embracing competitions for games such as League of Legends, Overwatch and Defense of the Ancients 2 in many countries. Some of the hot eSports countries in the region are Thailand, Vietnam and Taiwan.
9. China’s console market will remain unexciting
The Chinese console market has grown slightly but there are still a number of big obstacles preventing explosive growth. To grow in 2017 companies will need to employ lower console pricing, further title localizations and develop new Chinese titles. The China Hero Project represents an opportunity for Chinese development teams to contribute to the console industry’s growth and development in China. We will watch for whether Nintendo will enter China’s market as well.
10. Standalone games will find success on Steam and TGP in China and SEA
One trend we noticed last year was the resurgence of standalone games on Steam and TGP in China. Local payment support, cheaper pricing and simplified Chinese support has led to many titles finding success on Steam in the country. In addition, Steam held the second highest regional market share in Southeast Asia. We expect standalone game platforms like Steam and TGP to see notable growth in 2017 particularly in China, with many independent developers and AAA publishers supporting Simplified Chinese on these platforms to entice gamers. On the other hand, regulations could emerge that constrain Steam’s distribution in China.
11. Chinese and global game company investments to continue
2016 was a big year for acquisitions between Chinese and foreign companies. Tencent purchased Supercell for $8.6 billion, Giant led a consortium to buy Ceasars Games for $4.4 billion and Jagex was purchased by Zhongji Holdings for around $400 million. We expect Chinese games market leaders to grow by acquisition both domestically and expand their footprint overseas with global investments.
12. Augmented Reality and Location Based Services will be used in more games
Pokémon Go was a worldwide phenomenon in 2016 and is still a top grossing title today. The game utilized augmented reality (AR) and location-based services (LBS) in a fun, Pokémon collecting experience. The SAPPRFT is currently looking into whether Pokémon Go and other AR+LBS games can be safely distributed, given the threat, they pose to national security and personal safety – but they are banned for now and the outcome of the ongoing investigation will be published soon. It may be that they allow games like Pokémon Go if strict rules are followed. Tencent introduced LBS features in King of Glory allowing players to compete in leagues made up of players in their province, city or even school/workplace. We expect more games to embrace aspects of AR and LBS functionality this year.
13. HTML 5 games will become more popular in 2017
HTML5 games are set to further increase in popularity this year thanks to the evolution of game quality, monetization systems and distribution channels. More than 6,000 HTML5 games were released in 2016 and we expect this number to grow in 2017.
14. More foreign games will compete for gamers across Southeast Asia
As eSports shines a beacon on Southeast Asian gamers and the region continues to be among the fastest growing for PC and mobile games revenue globally, foreign (Western) game developers will take the region more seriously and begin to compete for attention of the gamers and local online game operators or mobile distribution channels in order to take a piece of that impressive market.
15. Final prediction is that Google Play will enter China this year
This was the only prediction out of the 14 we made in January 2016 that did not come true last year. But we believe that 2017 will be the year that the Google Play store starts operations in China. However, we don’t expect the store to achieve a notable market share given the heavy competition between Android stores in China at the moment.
Source: Niko Partners