Microsoft Gets a Head Start Selling Consoles in China
China is home to nearly half a billion gamers, who spent $13 billion on the hobby in the past year alone. That’s a sizable chunk of the world’s population and an enormous market by any estimation. But for the past 14 years, the Chinese government has blocked foreign game consoles from being sold in the country, leaving Microsoft (NASDAQ:MSFT), Sony (NYSE:SNE), and Nintendo (NTDOY.PK) out in the cold. Meanwhile, it’s been PC, mobile, and online games that have vacuumed up all of the profits.
That’s about to change. Earlier this year, China said that it would lift the console ban and allow foreign console makers to sell their wares in the country as long as they work with a local partner and operate out of the Shanghai Free-Trade Zone. Microsoft announced on Tuesday that it plans to do just that. The company has partnered with BesTV and is going to release the Xbox One in China in September.
In an announcement, Yusuf Mehdi, the corporate vice president of marketing and strategy for Microsoft’s devices and studios, said, “Launching Xbox One in China is a significant milestone for us and for the industry, and it’s a step forward in our vision to deliver the best games and entertainment experiences to more fans around the world.”
With a newly opened market as big as China’s, it’s only a matter of time before Microsoft’s competition gets in on the action. As yet, neither Sony nor Nintendo have made any announcements to that effect, but don’t be surprised if you hear noise from both companies soon.
Microsoft says the Xbox One will be the first console to launch in China under the newly loosened restrictions. It’s a head start it could use, seeing as the Xbox One is trailing the other current-generation consoles in sales. To date, according to VGChartz, the Xbox One has sold 4.4 million units, while the PlayStation 4 has sold 7.2 million, and the Wii U has sold 6.1 million. How long of a head start Microsoft will have in China remains to be seen.
There’s one more catch for game makers hoping for a slice of the Chinese gaming market. The Chinese government has issued a long list of reasons individual games may be banned, including things like violence, obscenity, drug use, and gambling. To make sure they’re suitable, all games sold in China will have to be approved by the “culture department in charge.” Since so many triple-A games are based on shooting, it will be interesting to see which games are allowed to be sold in the country and which are not.
Speaking with Polygon, Digital World Research analyst P.J. McNealy said: “For Microsoft, if you’re building a global strategy for console, you have to include China in the roadmap. Ideally, it will be the largest market over time. Realistically, it won’t be because there are certain inherent challenges with respect to intellectual property that will probably make things challenging. That said, it doesn’t mean this isn’t the right time to take a shot at selling the box in China.”
Since Microsoft is currently trailing Sony and Nintendo in sales, the sooner it can access big new markets, the better.