Leading research firm Niko Partners has released its latest report on video games in China. The Chinese Games Industry Regulations and Policy Report, which is co-produced by Pilar Legal, addresses the challenges that remain for game companies exploring China. Lisa Cosmas Hanson, Managing Partner of Niko Partners, refutes the rumors that Sony is bringing PlayStation 3 to China in this exclusive interview.
What’s the situation with Sony PlayStation 3 in China?
Consoles are banned in China and have been since the year 2000. In fact, recently there have been plenty of blog posts about Sony PS3 being granted permission to launch in China, but this is just untrue. Sony obtained the China Compulsory Certification (3C) in July 2012 for the PS3, but this in no way means it has bypassed the ban on consoles or that the ban on consoles has been overturned. A 3C is issued by the Certification and Accreditation Administration, which ultimately falls under the State Council. A 3C is required if a product is to be manufactured, sold, imported and used in China. Suffice it to say that the Certification and Accreditation Administration does not fall under the MOC, but the MOC has regulatory authority over the ban on consoles. Niko Partners and Pilar Legal interviewed a key official at the MOC, GAPP, and the Ministry of Industry and Information Technology (MIIT) for our report and we are certain that the ban is still in place.
Can you talk a bit about the ban on consoles? There was recent talk of PS3 being granted some sort of approval, but does that mean it is approved for sale in China?
The ban on consoles refers to game machines. There have recently been several mentions of a related segment that Niko calls “game console alternatives.” These are TV-based, local multiplayer games controlled by a controller, but they run from a system on chip (SOC) or from a set-top box. This is a nascent segment but growing, and it seems that the console ban does not apply to it.
How complex is the regulatory landscape for games in mainland China?
China’s regulatory landscape for the games industry is complex and companies planning to enter the market, either by establishing a Chinese entity or by licensing game titles or by posting game titles to app stores need to be aware of the rules. Some of the regulations and policies have been long established but what is really critical is to understand the practical implementation of the written laws and policies. Niko Partners and the Shanghai office of the US law firm Pilar Legal went through the comprehensive exercise of figuring out the true written regulations and the actually implemented policies when writing our report.
Are all games treated equally?
I wish I could say that all games are treated equally, but in fact foreign games need to go through extra steps of content approval. Backing up a bit, in theory all games in China must be officially approved by the Ministry of Culture (MOC) and General Administration of Press and Publications (GAPP). The MOC only gets involved with the approvals if it is a foreign game, but even domestic games must register with the MOC within 30 days of launch. There are other ministries and agencies involved too, each with its own opinion about foreign and domestic games and game hardware, but in fact foreign games are treated differently from domestic games. However, the same content rules apply for both foreign and domestic games. It is only the approval process that differs, and of course the fact that foreign PC online games must be operated by a domestically-owned online game operator.
Are all platforms treated equally?
PC online games comprise the majority of China’s games industry, and mobile games are on a quick ascent too. Because of piracy there are few single-player PC games published in China, yet one could argue that single-player PC games are treated differently in that the government has only modestly addressed piracy issues and the approval process for packaged games is slow, typically occurring far after the launch of the title in other countries.
What are the key regulatory agencies or ministries governing the games space? How do they work together?
The key regulatory agencies are the Ministry of Culture, General Administration of Press and Publications, and the Ministry of Industry and Information Technology. Also important are the State Administration of Radio, Film and Television, the Ministry of Public Security, National Copyright Administration and of course the State Council. They do not work together per se, but are all related. This is how it all gets complex and why companies need to be informed before guessing about the rules and regulations pertaining to them. With the advent of mobile games the Ministry of Communications is also involved.
How can a foreign company navigate the regulations and policies?
The only way to do this is to be informed themselves. Do not rely on your partner in China – some say things to benefit them or their contract with you and it is critical that each foreign company know the laws at least as well as the Chinese companies do. The best way to be informed is to hire a great law firm with a practice in games industry law, and the more cost effective and essential precursor to paying a law firm is to read the Niko report we issued last week.
What is the history of the ban on consoles? What is the current situation? What are the prospects for the future?
The history is that consoles were banned in the year 2000 because of a parental outcry that console games were bad for Chinese youth, but the next year is when PC online games were launched in China and now that industry is about $9.6 billion strong and growing fast. There are no domestic console companies today that would compete against the international 3 giants (Sony, Microsoft and Nintendo). Some officials in China believe that the global console industry is in decline and that China will not need to reverse the ban because it is predominately a PC gaming culture and that is the direction the rest of the world is going too.
In the US we have the ESRB for game ratings. What do they have in China?
There is no official regulatory board in China. There are some “green games” that are supposed to be good for youth gamers, and a slew of youth protection regulatory measures.
Can you give an example of a functionality or process that has been banned in online games?
There are plenty of rules governing online games content. One area that is banned is “treasure boxes”, and another concept that is enforced is the Anti-Fatigue Policy, which limits the game time for people under the age of 18.