Video gaming

Asian gaming industry will shrug off China’s crackdown and see healthy growth, UBS forecasts

The investment bank sees gaming revenues rising from US$60 billion in 2017 to almost US$200 billion by 2030, despite the impact of tighter regulation in China

PUBLISHED : Tuesday, 18 September, 2018, 7:46pm
UPDATED : Tuesday, 18 September, 2018, 7:46pm

Asia’s video games industry will expand by almost 10 per cent annually in spite of tighter regulations hampering growth in China, the world’s largest gaming market, according to UBS.

Beijing moved to restrict approvals for video game licences at the end of August, but a strong gaming culture and the success of existing titles will continue to drive China’s market and help Asia become the biggest market globally for games revenue this year, according to the Swiss investment bank.

“Near-term there are regulatory challenges in China, but for longer term overall industry growth prospects within Asia, we expect gaming revenues to increase from US$60 billion in 2017 to almost US$200 billion by 2030,” said Sundeep Gantori, an equity analyst at UBS CIO Global Wealth Management.

“We are content on long-term growth prospects because Asia, as a region, has a strong culture of gaming, not just in China but across Japan and Korea.”

China’s games industry at a turning point amid regulatory crackdown, with Korea offering a vision of its future

The industry in the region will grow at an average annual rate of 9.5 per cent, UBS predicted in a report Gantori was referring to.

“We are not super bullish, it is conservative given the regulations,” added Gantori, who was speaking in a media briefing at the UBS Disruptive Technology Summit in Hong Kong on Tuesday.

UBS cited the gaming industry as one of its six key global “disruptive” technology trends to invest in.

On August 30, China’s State Administration of Radio and TV and the Ministry of Culture formally introduced regulations to control the number of online games and new game titles, though there had been no new approvals since March. A new content rating system also carries age recommendations and limits the time underage children can play online games for.

The new measures were launched after President Xi Jinping expressed concern about the rate of myopia – near-sightedness – in Chinese children and teenagers. According to the World Health Organisation the country has 600 million near-sighted people, while the rate in Chinese youths tops world figures.

Monster Hunter: World – Tencent pulls top selling game days after launch as China continues online content crackdown

Under the new laws, the government has to approve every game that goes on sale.

In a widely publicised example, internet giant Tencent was ordered to take down Monster Hunter: World on August 14, five days after its launch. Removing the blockbuster title, which Tencent had licensed from Japan’s Capcom to sell on its WeGame platform in China, caused shares to tumble, wiping out US$15 billion from Tencent’s market value the following day. Gaming revenues are the biggest source of income for Tencent.

The lack of new licences saw China experience its slowest first-half growth in the games industry for at least five years, according to data from researcher CNG.

But loyal gamers enjoying titles that have already been available for five to 10 years will add to growth. A diversified audience across genders – 45 per cent of mobile gamers in China are female – and new devices such as virtual reality headsets will also prop the market up, according to Gantori, who sees regulatory pressures easing.

“China is growing slightly less than the Asian market given its huge pace but, even if regulation pressure remains, I don’t think its market will decline because, as a society, it has a very strong gaming culture and the titles will create decent revenues,” he noted.