China’s Game Industry Exhibits“Smile Curve”

By Ada Wang

During the first half of 2021， the total sales of Chinas game industry reached RMB 150.493 billion， up by 7.89%. On July 29， GPC and the China Game Industry Research Institute coissued the January-June 2021 Report on Chinas Game Industry （hereinafter called“report”）. The report shows that as the innovation mechanism keeps improving， the quality of self-developed game products of Chinese game companies has also been enhanced. The product competitiveness keeps increasing and the Chinese games have achieved tremendous success in the overseas market. The Chinese digital entertainment industry exhibits the “smile curve” and has very thriving prospects for development.

Success in going overseas

The report shows that during the first half of 2021， the total sales of Chinas game industry amounted to RMB 150.493 billion， up by 7.89% from the previous year； the number of game users reached 667 million； and the sales of Chinas self-developed games in the overseas market amounted to USD 8.468 billion， up by 11.58%.

The report believes that today， Chinas game industry is embarking on the track of high-quality development. The overall performance of the game industry in the first half of 2021 can be summarized as follows：

First， The national real name registration platform has been officially launched and the industry mechanisms keep improving， which has promoted the upgrading of the means for protecting minors.

Second， The issuance and implementation of local cultural industry support policies have widened the channels for R&D and promotion of high-quality game products. The game industry has started to embrace new policy opportunities again.

Third， As consumption demands keep changing， the segmented market of the game industry will see the emergence of many new growth opportunities.

Fourth， Game enterprises will upgrade their strategic layout， rely on independent R&D， and continue to make efforts in technology application， IP operation and other fields.

Fifth， The innovation ability of independent and original game products has been widely enhanced. The variety of game products will be more diversified and expanded. Premium products will always focus on long-term development and operation.

Sixth， Game enterprises continue to promote the global launching strategy and open up diversified development paths through refined operation and localized marketing.

Seventh， Game enterprises are focusing more on the building of internal cultures and social images. The corporate awareness of legal compliance and the willingness to fulfill social responsibilities has been continuously improving.

In particular， from January to June this year， the actual sales revenue of Chinas self-developed games in the domestic market reached RMB 130.112 billion， up by 8.3% from last year. The actual sales revenue of Chinas selfdeveloped games in the overseas market reached USD 8.468 billion， showing a year-on-year increase of 11.58%， which is higher than that in the domestic market.

The top five overseas markets with the highest sales revenue for Chinas selfdeveloped game products include： the U.S.， Japan， South Korea， Germany and the U.K. The U.S. accounts for more than 30% and Japan accounts for more than 20% of the total.

Strategy games， shooting games and role playing games are the most popular. Strategy games account for 41.47%， far surpassing other game varieties.

Three trends require attention

Chinas Covid-19 pandemic prevention and control has achieved great success between January and June， 2021. Peoples lives have returned to normal. Compared with 2020， many users are spending more time outdoors. The industry sales volume achieved significant growth in the first half of the year， despite a large increase of more than 22.34% in the first half of last year. This shows that Chinas e-game industry has embarked on the road of high-quality growth， showing a more healthy and prosperous development trend.

There are several notable trends which can be seen in Chinas game industry in the first half of 2021.

Quadratic element games achieve rapid growth

Between January and June 2021， the total sales of Chinas quadratic element games reached RMB 15.81 billion， up by 50.15% from last year.

On the one hand， Naruto， Onmyoji， Arknights and long-term products have been growing in sales； on the other hand， new game products such as Genshin， Douluo Continent： the Awakening of Martial Arts， One Piece： Heated Route， Tiandijie： the Arrival of Youcheng and Yu-Gi-Oh！ Duel Links have contributed a lot to the total sales.

Mobile casual games have great development potential

In the period January to June， 2021， the total sales of Chinas mobile casual game industry reached RMB 16.951 billion， up by 8.57% from last year.

On the one hand， new games such as Jade Master and Social Harvest contributed to new sales； on the other hand， Protect Carrot 3 and Rodeo Stampede have seen a remarkable increase in the number of downloads， which has brought a new sales volume.

In addition， the market value of e-sports games has reached several tens of billions of yuan. This is expected to reach RMB 11.64 billion in 2021， with a growth rate of approximately 10%.

High-quality development has become widely acknowledged by the industry

Online games are an important part of the Internet entertainment industry. In 2020， when Chinese people stayed at home for pandemic control and prevention purposes， and outdoor entertainment activities were greatly reduced， online games became an effective way for people to relax and destress； in 2021， consumers are spending more time on outdoor activities， but the game industry is still growing， thus indicating that high-quality development has become the driving force behind the growth of Chinas game industry.

During the first half year of 2021， Chinas game enterprises must focus on new technologies， arrange business in new fields， locate new demands， develop new consumption scenarios and promote new businesses. They should explore new ways and channels for presenting game contents and advance the innovative development of the game industry.

At the same time， the game industry has achieved continuous and healthy development， and as the regulation systems for the digital entertainment industry continues to improve， the regulation authority enhances the guidance and control of the network contents， and anti-addiction measures are implemented to protect minors. Game enterprises have actively explored the cultural， social and scientific values of games and fully fulfill their social responsibilities.

Six bottlenecks stand in the way

The report points out that in the first half of 2021， the game market has been expanding in terms of the number of users and the regional markets. The market share and product quality have been substantively improved. However， the development of the game industry still encounters bottlenecks in individual links， mainly in the following aspects：

First， anti-addiction work still needs improvement. There needs to be more protection measures in place for minors；

Second， the market share has become more concentrated for top players. The market competition mechanism needs further improvement；

Third， the pressure on small and medium-sized enterprises has mounted. Promoting the diversity of industrial development will become the future trend；

Fourth， the industry is showing homogeneity in terms of the game products. There is lack of classic products；

Fifth， it has become more difficult to nurture industry talent. The academic and theoretical research about games still needs improvement；

Sixth， the foundation of the e-sports game industry is still weak. It requires multi-layered support from the national and local government in terms of technology， human resources and capital.

With the introduction of local support policies， the market environment is improving and the impact of events is expanding， and the e-sports market still has a broad growth space.

According to the Global Entertainment and Media Industry Outlook from 2021 to 2025 released by PwC， the total revenue of video games and e-sports reached USD 31.5 billion in 2020， and the total revenue from 2021 to 2025 is expected to reach USD 41.7 billion， with a CAGR of 4.99%. Within this， the CAGR will be 4.9% for video games and 12.3% for e-sports in China. At the same time， the proportion of Chinas social/casual game revenue in Chinas total e-game revenue will reach 71.8% in 2025， and the proportion of the media sponsorship revenue in Chinas total e-sports revenue will reach 75.1% in 2025.

Mo Bin， a partner of the entertainment and media industry for PwC China， said： “Compared with the global market， Chinas entertainment and media industry has been recovering faster. With the relaxation of blockade restrictions， some market segments such as film， live music and trade exhibitions will usher in strong growth in 2021. In the next few years， with the lasting impact of the pandemic and continuous technological innovation， the market competition in Chinas entertainment and media industry will change greatly. It is expected that OTT （over the top） video and virtual reality business will continue to grow in the future and their market share will thus increase. ”