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China Lifts Gaming Ban

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China Lifts Gaming Ban

All eyes were on China yet again this morning when the country announced some interesting new policy changes. China announced that it has temporarily lifted a 14-year-old ban on selling video game consoles, paving the way for companies like Sony Corp (NYSE:SNE) , Microsoft Corp (NASDAQ:MSFT) and Nintendo Co Ltd (OTCMKTS:NTDOY) to break into the third largest video game market in terms of revenue.

At this time, investors will have difficulty quantifying the true significance of the move in terms of revenue. Console makers are likely to face an uphill battle for market share in a country where a whole generation has grown up without a PlayStation or XBox.

Currently, the Chinese people are accustomed to using free PC and mobile games dominate. According to data released at the annual China games industry conference in December, the absence of consoles has left PC games with almost two-thirds of the market. Moreover, browser gaming accounted for just over 15 percent of market share and mobile gaming was nearly 14 percent, the data also showed.

China decided to ban game consoles in 2000, citing their adverse effect on the mental health of its youth. Whether this was the true reason for the ban isn’t known, there are a handful of other reason the country may have decided to ban the consoles. Perhaps, the use of gaming consoles, vs. online gaming, presents a tougher regulatory environment.

The State Council stated that the suspension of the ban permits “foreign-invested enterprises” to make game consoles within Shanghai’s free trade zone and sell them in China after inspection by cultural departments. In the coming weeks we should have more clarity on the meaning of these actions. Who knows how well the Chinese will embrace gaming. My guess is they will.

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