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Next Gen Goes Next Frontier: Xbox One Coming to China in 2014

by Eric Smith | Apr 30, 2014

Well, that didn’t take long.

Less than a month after China set its guidelines for entrance into its game console market after a 14 year-long ban, Microsoft announced that it will launch the Xbox One in September 2014. Keen observers may note that Xbox One also launches in Japan during the same month, though I’m sure Microsoft is expecting to far surpass its market position in Japan.

For starters, Japanese brands aren’t as revered in China as they once were, partly due to more choice from domestic brands and partly due to geopolitical flare-ups in the last several years. This is as true for automobiles as it is for consumer electronics. The pre-launch PR war that left Microsoft bruised would be largely irrelevant in China.

Furthermore, Microsoft is approaching the Chinese market with a focus on being culturally relevant. By necessity, Microsoft invested $237 million into BesTV New Media, a local IPTV and OTT video provider, to produce and distribute its consoles from the Shanghai Free Trade Zone. This joint-venture was actually created last September, when the lifting of the game console ban was first announced, and will support efforts to recruit Chinese developers to bring culturally relevant games to the platform. In addition, several BesTV apps will come preloaded on Xbox One consoles sold in China and will even be available for users abroad who are looking for Chinese video content.

Lest game consoles corrupt Chinese youth, the Chinese Government has set restrictions on what content would be allowed in games. A few of the reported restrictions are as follows:

  • Anything that harms the nation’s reputation, security, or interests
  • Anything that instigates racial/ethnic hatred, or harms ethnic traditions and cultures
  • Anything that promotes or incites obscenity, drug use, violence, or gambling
  • Anything that harms public ethics or China’s culture and traditions
  • Anything that insults, slanders, or violates the rights of others

 

The joint-efforts of Microsoft and BesTV to bring Chinese game developers into the mix may serve the dual purpose of creating games that locals actually want to play and ease the process of getting game content beyond regulators and into the market faster.

Though game consoles have been banned for 14 years in China to protect the moral fabric of its youth, a small portion of households have purchased game consoles on the grey market, as is the case in many emerging markets. The difference now is that the best features of Xbox One are available only when connected to the internet and authenticating with Microsoft servers. As mentioned before, Microsoft’s partnership with BesTV will boost its ability to bring relevant OTT content into the home through native apps, a nod to China’s heavy use of OTT multimedia.

Certainly, Microsoft stands to grab a significant chunk of market share in China due to all of these factors, but the size of the legitimate Chinese game console market will be the biggest question mark. I’m currently skeptical that Chinese console gamers will ditch their grey market consoles and pay the premium for a legit next gen experience. I’m less optimistic that price-sensitive F2P and freemium gamers on mobile and PC make this jump. On the other end of the spectrum, core PC gamers in China are likely to stick with their current machines which can already stream OTT video and play games that millions of other Chinese gamers are already playing.

Still, if just a fraction of a percent of gamers jump into the newly created white market for game consoles, Microsoft and other future entrants could have a golden opportunity to revitalize the global game console market just as pundits are writing its obituary.

- Eric Smith
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