China (Ep. 20)
Mitch and Blake look at the current state of the vitally important Chinese gaming market, on the precipice of a bitter trade war resulting from the Trump tariffs. They review the history of the games business in China, discuss the reasons China is so competitive in the global gaming market, and look at how some of the ways the Chinese market diverged from other markets influenced the strategies of Chinese game companies. In particular, they look at how China's relatively late entry into the games business proved to be a benefit, by allowing them to skip the packaged goods era and therefore avoid all the ways that the packaged goods legacy has burdened incumbent US and European publishers. They discuss how the restrictions that the Chinese Communist Party places on the games business have influenced the development of the market, for better or worse. They analyze how this unique domestic situation pushed the top Chinese companies to look outside China to deploy capital to secure various strategic content and distribution advantages (e.g., Riot, Epic, Garena). They discuss the strategies of top Chinese publishers TenCent and Netease in this light. They talk about how US national security interests affect Chinese publishers' ability to invest in and potentially acquire US game companies. They discuss how, over time, homegrown content has come to dominate the Chinese market, and the way that pattern is similar to what happened in the film business, where China migrated from importing Western content to creating its own. Mitch and Blake marvel at how China has gone well beyond replacing Western game imports, with Chinese products such as Genshin Impact and Black Myth: Wukong emerging as viable AAA games suitable for successful export to the US and European markets. They also look at the success of Chinese mobile games such as Last War and Block Blast! and how good these companies are at distribution arbitrages. They conclude the episode with a look ahead and discuss how the current global political situation may affect the future of both Chinese and Western game businesses. Show Notes: