Times might be tough for South Korean game developers trying to launch new games in China. According to a report from Nikkei Asian Review, China has currently frozen licences for South Korean developers to prevent all games made in the country from being published in China.
There has been speculation about this move being a response to a new THAAD (Terminal High Altitude Area Defence System) missile defence system in South Korea, developed under the partnership with the United States. Despite South Korea reportingly claiming that the missile-muting shield is meant to protect the country against North Korea’s nuclear ambitions, China sees it as a threat to their own national security.
This ban will affect all the new games that are developed in South Korea and are yet to be released in China. The length of this ban is currently unknown (most of the articles related to this ban have been released in the beginning of March), although existing Korean games already published in the region have been unaffected so far.
Game launching in China is already a difficult process for any foreign developer. Games released in the region have to be pre-approved 20 business days prior to launch by China’s State Administration of Press and Publication, Radio, Film and Television (SAPPRFT) and the publishing needs a series of paperwork filling and approvals, which we have discussed in one of our previous market insight articles. The licencing freeze has already affected some developers: Nikkei reports that shares in Nexon have dropped already by 7% on the beginning of March after the news were released. For Nexon’s PC-based online business, around 90% of the sales comes from markets such as China and South Korea. However, according to a source from Nexon, “earnings have not been impacted” by the Chinese regulators.
Obviously tensions have been rising after the ban, says Daniel Ahmad, Niko Partners analyst: the analyst has shared his opinion on what the current ban could mean for the South Korean publishers and developers. Already for few years, Chinese government has imposed the regulation for foreign PC game companies to partner up with a Chinese publisher to operate in the country. Since last July, this regulation has been extended to mobile game developers. The games that have already purchased a licence, like Nexon’s Dungeons and Fighter Mobile have not been affected, as Ahmad told PocketGamer.biz.
However, the games that have not been published yet, for instance the new Netmarble’s Lineage II Revolution (and still top grossing in South Korea according to SensorTower) has not been approved, and it has faced issues with launching in China. After the huge success the game had in Korea (with $176 million in revenue during its first month), Netmarble has been planning a global launch with each version developed specifically for the target region, with markets including Japan, U.S., Europe and China. A spokesperson for Netmarble, Venturebeat websites reports, said that the approval request for Lineage II Revolution has been already submitted through the publisher Tencent in China, and it is currently under process.
Lineage II Revolution (Image Credit: Netmarble)
Daniel Ahmad explained how the regulatory landscape for digital games is quite tricky in China. And while the licenced games are still allowed at the moment, there is always the risk that these licences might be pulled. The tension between the countries has been growing, and after the unofficial ban of tourism and Korean entertainment imports following the THAAD, it might come at no surprise that games would have followed next.
With the high level of uncertainty, will this ban be a pitfall, or an opportunity for Korean developers to explore new markets?
Sources: Ric Cowley for Pocket Gamer.Biz
Dean Takahashi for Venture Beat
Dusting Steiner for PVP Live