Russia is playing a prank on China

Participants in the Russian video game market have decided on the state support they need to enter the Chinese market. Companies would like to pass the censorship of Chinese regulators bypassing the general queue, otherwise, they estimate that they will have to wait three to five years for approval. There is an option to gain access to the market through agents, but they can eventually take up to 80% of the income.

As it became known to Kommersant, on March 29, a strategic session was held at ANO Tsifrovaya ekonomika, dedicated to the problems of promoting Russian software abroad, primarily in the EAEU and BRICS. According to one of Kommersant’s sources, market participants decided to send a number of proposals in the field of video games to the government. Among them are state support for the development of several new MMOs (Massively Multiplayer Online Game) by Russian studios, the creation of joint projects with Chinese video game development companies, as well as the allocation of 50 special licenses per year to accelerate the entry of Russian video games into the Chinese market.

The fact is, the interlocutor of Kommersant explains, that any game publisher, Chinese or foreign, must obtain the approval of the censorship regulator before entering the PRC market: “The queue for permissions stretched for three to five years ahead. We ask the government to achieve a special procedure for Russian publishers, which will allow them to bypass the queue.” He clarified that ANO Tsifrovaya ekonomika collects proposals from the industry in order to send them to Deputy Prime Minister Dmitry Chernyshenko. The Ministry of Digital Transformation, VK, which owns the largest game store in Russia, VK.Play, and ANO Tsifrovaya ekonomika did not respond to inquiries.

The issue of Russian developers entering China has been discussed for a long time. A year ago, Vedomosti wrote that publishers and studios at meetings of working groups in the Ministry of Digital Development spoke about the need for support in this direction. The issue was also raised at a meeting with representatives of the presidential administration (see Kommersant of May 20, 2022). According to a Kommersant source familiar with the current discussion of support, “negotiations with Chinese colleagues have already been, and have been productive.” “The conditions and mechanism for exporting Russian games that are produced independently or with certain support measures are being discussed,” adds the interlocutor of Kommersant.

An ISBN license, which is needed to arrange payments for downloads or in-app purchases for users, is almost impossible to obtain without a local publisher, explains Kirill Lyakhmanov, General Counsel of EDB’s Intellectual Property Practice.

These companies register through the National Copyright Administration, are reviewed by the Internet Information Service Management Measures, Publisher Management Regulations, the regulator for personal data and the protection of minors from illegal content, apply for qualification selection by the National Printing and Publication Administration, which issues a license, explains Mr. Lyakhmanov.

As a rule, the department issues 30-40 licenses per year, Boris Edidin, deputy chairman of the commission for legal support of the digital economy of the Moscow branch of the AJUR, adds, but it does not report on the selection principles, and may also not issue a license even to games that it has previously approved. “Formally, it takes 80 business days to obtain a license, but key publishers apply for it at the pre-alpha stage (the earliest stage of game readiness.— “b”) to avoid unnecessary delays with the release of the game,” he clarifies.

But working with local Chinese publishers drastically reduces the developers’ revenue, says Kommersant’s interlocutor in a large Russian studio. According to him, intermediaries take only 5-15% of sales for installing the game in a Chinese store. If the agencies are also involved in marketing, the commission rises to 60-80%. “Having a license in hand, you can reduce the commission or agree on significant investments by the second party in marketing,” the Kommersant source clarifies. The tough protectionism policy has already hit the Chinese video game market, wrote the South China Morning Post in January, in 2022 its volume fell for the first time in 20 years (by 10.3%), to $41.1 billion, and the number of players did not grow. But their number is still huge – 664 million people.

Nikita Korolev