The China Game Industry has faced layoffs and more ever since the Chinese government put a freeze on new game publishing approval 5 months ago, with many game companies in the country shutting down.
Briefly, the way it works is simple: The Chinese government doesn’t allow games to be published in the country without prior approval from the government. This involves rigid content checks, making sure games don’t go against the government’s values.
In the midst of their big overhaul, the government had frozen approval for new licenses- meaning no new games could be published in the country.
On the Game Development Side
While obviously bad for the gamers, it’s also terrible for developers. Game development isn’t cheap, and to have your months or even years of hard work suddenly choked out by the license freezing means no means of getting the income to pay your staff.
According to Securities Daily, 300,000 game companies had reported less than 10 million yuan earnings, with more than 14,000 companies shuttered.
Worse still, game studios that remained open in China were subject to massive layoffs- Covetous Blue Moon publisher Covetous Games saw far less game approvals this year, with only 4 before the license freeze in July.
As a result, Securities Daily says the company has been laying off staff for the past two months, as well as cancelling the year-end bonuses.
This affects small companies the hardest: While big companies like Tencent have many live service games to provide revenue streams, the Chinese Government seems inclined to make things harder, especially with the reported blacklisting of Steam providing a challenge.
Game Companies Head Overseas
According to the report, many game companies in the country have started heading overseas due to the tightening restrictions.
“The suspension of game license number issuance does have an impact on small and medium-sized game enterprises, but it also forces them to find a way out.” Zhang Yi, CEO and chief analyst of Ai Media Consulting, told the Securities Daily, “In fact, when the issuance of game license numbers was suspended in 2018, some companies realized the importance of ‘going abroad’, and the domestic game ‘going abroad’ The rhythm of the company is accelerating, and some companies’ business focus is even overseas.”
It’s no surprise they would- mega-companies like Tencent have publishers outside of China, and even miHoYo had done the same with its Singapore-registered Cognosphere.
However, not every company can afford this- small indie teams obviously wouldn’t be able to afford a whole remote publisher overseas, and even big companies like Perfect World have had to give up their overseas branches.