China will allow game consoles to be made and sold nationwide, but don’t get excited

Bloomberg reports today that Chinese authorities are planning to get even more permissive when it comes to game consoles. Although the console ban has already been lifted, as of now companies can only manufacture and operate consoles if they’re doing it from within Shanghai’s experimental Free Trade Zone. According to Bloomberg, though, that restriction will soon be lifted and game companies will be free to make and sell their consoles anywhere in the Middle Kingdom.

That’s the sort of news that tends to get people overexcited, especially when it’s paired with context like this snippet from the Bloomberg article:

Foreign game console makers such as Microsoft Corp., Sony Corp. and Nintendo Co., stand to benefit from increased access to what PricewaterhouseCoopers LLP estimated was a $10 billion video game industry in the world’s second-largest economy.

But as always, I am here to throw water on the Chinese console gaming party.

First of all, the new regulations will not really give Microsoft, Sony, or Nintendo “increased access” to the Chinese market. The Free Trade Zone rules affect where companies can manufacture their consoles, but consoles can already be legally sold nationwide. Microsoft’s Xbox One, which was released last fall, has been available nationwide from day one. Lifting the Free Trade Zone restriction may make manufacturing and operation more convenient, but it won’t affect console gaming companies’ access to the Chinese market at all. They already have total access.

Secondly, while China’s game market is massive—all told, it took in more than US$13 billion in 2013—console gaming accounts for only a tiny fraction of that number. The vast majority of the money in China’s gaming market comes from PC games. Mobile games finish second. Browser games and social games come after that. Revenues from console gaming made up just 0.1 percent of China’s total gaming market in 2013.

Yes, those numbers are from before game consoles were legal. But consoles have been widely available in China for the entirety of their “ban” – that rule was simply not enforced. The fact is that console gamers are simply few and far between in China. That’s why Microsoft’s Xbox One launch shipped only 100,000 units (that’s including preorders and orders from scalpers and online resellers). It’s not clear how much the console has sold since, but Microsoft’s tight lips certainly don’t indicate that it’s breaking any sales records.

Finally, the removal of the Free Trade Zone rules for game consoles won’t have any affect on the larger problem: there aren’t any fun games to play on them. The Xbox One’s launch lineup of games was terrible. So was Sony’s planned catalog of launch titles before the company was forced to postpone its PS4 plans indefinitely (probably so that it could add more restrictions to the console). The Ministry of Culture’s restrictive content rules mean that most of the global gaming world’s top console hits will never make it to Chinese systems. And at the same time, the most popular game genres and titles in China (mostly MMO, MOBA, and RTS games) just aren’t compatible with consoles.

I’ve said all of this many times before, of course, but it bears repeating as China further lowers its restrictions on console makers. Don’t fall for the hype. Yes, China’s gaming market is massive. But its console gaming market? That’s still pretty tiny, and I still haven’t seen any signs from consumers that it’s about to blow up.