The State Council has officially announced that game consoles will be allowed in China, if manufactured within the Shanghai Free Trade Zone. Item #32 in an announcement by the State Council on January 6th confirms what was tentatively announced on September 27th, 2013, which is that the console ban has been lifted for foreign and domestic game consoles. However, the detailed regulations have not been finalized nor announced. Games will be regulated by the Ministry of Culture. Hardware will be regulated by the Ministry of Industry and Information Technology.

One key point of analysis is that the Chinese console market will not be what many Western observers are anticipating. The hardware, connectivity, content, distribution and services will all be designed within Chinese government standards. It is unclear what that means yet. We would caution our clients against thinking that this means the existing consoles sold on international markets will simply be dropped into China with localized versions of current games. Additionally, as a reminder, there has been a vibrant grey market for consoles for more than a decade, and most gamers who strongly wanted a console have already purchased one. The market will open up for mainstream consumers and for those who want the online services however. We are taking a wait and see stance for now. 

Thanks to the rise in home PC penetration, an improvement in home broadband access, and strong demand for mobile devices, the Internet café sector of China has been challenged. The Ministry of Culture is encouraging service providers to improve what they offer in order to stay afloat. 

The Office of National Internet Security shuttered the console game website 3DMgame.com. 3DM distributes pirated console games, and on January 6th the State Council confirmed the reversal of a 13-year ban on consoles. An executive from 3DM says that the Ministry of Culture will have a violence and ratings system for console games in the new regulatory system, so the games 3DM distributes would be banned. But the Ministry of Culture denied that to be the reason for the shuttering as well as denying that there would be a classification or ratings system for console games. 

A report on 17173.com from a Chinese government body announced that the value of the 2013 games market revenue was $13 billion. Niko's most recent estimate for 2013 revenue was $11.8 billion for PC online games and $1.2 billion for mobile games. We will confirm the 2013 total and build a new 5-year forecast in an upcoming report for 2014.