Video game makers tackle overseas markets

"With the channel for going overseas more congested than ever, game makers can no longer hope to win by simply repeating previous successes," said Zhu Zhongrong, a game insider, adding that developers today need to be more sensitive to local needs.

A number of professionals responsible for overseas operations of games companies expressed similar views during this year's ChinaJoy, or the China Digital Entertainment Expo & Conference.

Last year, 37 Interactive Entertainment's overseas earnings had been among the top three domestic companies, after Tencent and miHoYo. According to Luo Qian, who is responsible for its advertising, localized operation and diversified customer needs are the common challenges confronting game makers looking to overseas expansion.

This, as dictated by the different player predilections in different market, places higher demands on games companies' sensitivity to analyses of data and customer needs, so as to allow sufficient time for advance planning and deployment.

In recent years, with the rising share of Chinese mobile phone makers in overseas markets, their app stores are in a proactive position, affording Chinese game makers an alternative channel.

Over the past few years, even though Chinese game makers' overseas market expansion has been less than smooth, going overseas has become the general consensus for major players.

Statistics from Sensor Tower suggest role-playing games (RPG) and simulation games (SLG) are among the top earners, reaping profits to a tune of US$20 billion and US$14.8 billion in mobile game apps, respectively.

However, Google statistics suggested that 77 percent of American mobile game consumers were spending less and, globally, mobile users spent 13 percent less time on games.

Which boils down to a new paradigm shift: users are spending less time, and less money, for more fun.

Currently China still accounts for a significant share in SLG and MMO, or massive multiplayer online games, particularly in terms of SLG, where Chinese game makers dominate, accounting for 82 percent. Meanwhile, there is still considerable room for growth for card RPG, or games that are entertaining and intellectually stimulating.

Another tendency is that, as releases of new games slow down, the number of downloads of existing games already surpass that for new releases.

With the cycle of old games being extended, there is a major challenge for game makers to acquire new customers within the longer life cycle on a sustainable basis.

In their recently released financial papers, Tencent management have reiterated the importance of "evergreen games" to the company, with the pledge to prioritize long-term operations of these products.

The starting point for most domestic companies' overseas expansion is East Asia and Southeast Asia, given the cultural affinity.

According to statistics from Data.ai, South Korea and China's Taiwan are among the second-tiered mobile games market, as well as major overseas destinations for domestic Chinese mainland companies.

In term of earnings, the combined North America and Japan market amounted for 55 percent of the overseas market in 2023, much larger than other overseas markets.

According to sources from 37 Interactive Entertainment, when it started its overseas expansion, it originally targeted China's Hong Kong, Macau, and Taiwan, and then moved on to Japan and South Korea, and then further on to European and American markets.

It is worth noting that over the past two years, Russia and nearby countries are also targeted by domestic game makers.

According to Sergey Ustinov, who is responsible for advertising in Asia-Pacific for Yandex, the biggest search engine in Russia, although many Chinese companies tend to view Russia as T2 (second-tier) market, he believes that, given the capacity of the Russian market, promotional costs are edging up closer to that for T1 (first-tier) markets.

According to him, in Russia about 56 percent of players play on mobile phones, and the number of Russian downloads from Google Play ranks the fourth in the world.

Some domestic game makers would be keen on promoting self-developed products, though some would also double as agents for promoting other companies' products. Finding the right products for overseas markets is the major challenge confronting many game publishers.

37 Interactive Entertainment has invested significantly in third-party content providers. An insider revealed that the company is more keen on investing in content providers with core competitiveness, in terms of novel games, those with higher technical barriers, or distinct artistic styles.

After settling on a certain product for overseas promotion, localization of operations will be vital to success.

A developer who had launched its products in Japan revealed that advertisement elements need to be localized so that the language, visual effects and acoustics align better with local styles, thus narrowing the cultural gap, enlarging the market coverage, and generating higher revenues.

Given the growing costs for overseas promotion, 37 Interactive Entertainment's answer is to include more customers traditionally outside the players.

Ustinov held similar views. He said that Google's departure from Russia last year left more domestic companies vying to snap up the market share, which inadvertently heightened the promotional costs.

He warned that Chinese game makers should be psychologically well prepared for this situation in entering the Russian market.