International Law

More China Problems for Foreign Game Licensors

By Stan

From JLM:

The General Administration of Press and Publication (GAPP) intends to tighten approval criteria for online game imports in an effort to protect the development of domestic online game enterprises and avoid the excessive penetration of foreign culture among Chinese youth, reports Sohu quoting GAPP Technology and Digital Publishing Bureau Director Kou Xiaowei on March 16. GAPP will move from inspection standards that treat domestic and foreign games equally to become more strict when dealing with influential games such as The9’s (Nasdaq:NCTY) licensed MMORPG World of Warcraft, said Kou.

GAPP is scheduled to hold a meeting with online game companies on Wednesday to disseminate information on approval processes, new import-directed policies, the fatigue system and other topics.

The central government supports the export of domestic online games as a way to promote Chinese culture, and the GAPP plans to organize an overseas roadshow for domestic companies to cultivate efforts abroad, according to another Sohu report quoting Kou.

I would really like to have seen the original quote by the GAPP official on this one. The reported comments are interesting, to say the least. Did a government official really state that the new policy was designed to “protect the development” of domestic industry?

China does favor the infant industry argument, and many government agencies have been quite instrumental in protecting domestic enterprises over the years (e.g. MIIT). However, to come out and say so during a time when any sort of protectionism is loudly denounced by Beijing, that’s surprising. I have a feeling that the original quote was probably not so straightforward.

Anyway, I’m curious to see where this goes. The online game industry is not easy for foreigners as it is. Only domestic companies can operate such games, so all foreign online games over here have the same basic structure: cross-border IP license to a PRC operator.

When some of the current big operators were just starting out, they had little leverage with foreign licensors, and they had a lot to lose from tough censorship procedures. That was before they starting developing their own titles and hosting them alongside the licensed games. These days, tougher standards on licensed games are a mixed bag for local operators. For new entrants to the market and operators with no foreign game licenses, tougher standards reduces competition.

This has always been a highly-regulated industry for foreigners, and it looks like it may get even tougher.

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Full post as published by China Hearsay on March 17, 2009 (boomark / email).