MORE FROM KrASIA

Why Apple’s new rules for games in China could spell trouble for indies

Apple and TikTok maker ByteDance are asking for developers to show game licenses as China tightens its grip on video game publishing.

Photo by SCREEN POST on Unsplash

Four years after China declared that all games need to be approved by the state, Apple is now moving to enforce that rule on its iOS App Store in China. And the move could spell trouble for creative indie games.

In a notice to developers, Apple said it’s now requesting all games with in-app purchases to submit their licenses by June 30th this year. Apple isn’t alone; ByteDance is also looking to enforce this rule on its own mini app store on China’s TikTok, Douyin, but the company didn’t give a specific deadline.

As it stands, this new requirement only applies to games with in-app purchases, so free games like those supported by ads are spared. But it could hit foreign indie developers especially hard.

“Only Chinese citizens or Chinese companies can hold the copyright for games approved [by the National Radio and Television Administration],” AppInChina marketing manager Todd Kuhns said. “So in order for these iOS games to go through the approval process and get that ISBN, they will have to sign over their copyright to a Chinese partner.”

Android app stores in China have been complying with this regulation since 2016, but with Apple now on board, some people fear what it means for independent developers both inside and outside the country. Industry watchers expect that there will be a significant reduction in the number of games available on the App Store in China as a result.

With Apple finally enforcing these restrictions, foreign iOS game developers are losing one of the only loopholes left for them to sell their games directly to Chinese consumers.

We reached out to Apple for more detail, but didn’t receive a response.

AppInChina CEO Rich Bishop said many companies could suddenly lose a lot of their revenue from China on June 30th. Bishop also expects Apple to take a hit in revenue since the company takes 30% of in-app purchases.

Bishop points out that this requirement is expected to affect all games on the App Store in China, including older titles. Most games on the App Store currently operate without a license, which could mean most are at risk of being taken down in China.

While outside of China game makers can normally publish their apps on Apple’s platform without any government interference, that’s not the case in countries with more content restrictions like China and Vietnam. These countries have been increasingly pushing toward government approval requirements for games in recent years.

Kuhns said that homegrown gaming giants such as Tencent and NetEase will likely benefit from Apple’s new approach, and smaller gaming companies will face rising operating costs. That means more blockbuster titles like Honor of Kings and PUBG Mobile and fewer small, artistic games from self-publishing indie developers.

“Gaming licenses cost a lot of money,” Kuhns said. “For proven successful games, or large-scale companies with big pockets, the gaming license cost is no big deal. For smaller developers, it’s often a nonstarter.”

Small developers with games that have a proven track record overseas can still team up with Chinese publishers to distribute their games. This, of course, would also benefit the big players. Tencent has already been working to recruit quality indie games through its A.C.E. program.

Another way to adapt to this new regime is to shift away from in-app purchases to an ad-supported model, Bishop suggested. But that could be a difficult shift for many because ad-supported games and games with in-app purchases have fundamentally different designs.

Apple’s compliance is also expected to drive more Chinese game developers to seek opportunities overseas.

“With stricter regulations on licenses, Chinese game developers, which now have all the technical know-how to churn out games at a high clip, are now eyeing markets like Southeast Asia for fresh opportunities,” Green Orange Games partner Qu Jia said.

While gaming giants Tencent and NetEase have been ramping up global expansion, Qu said smaller companies are even more desperate to find growth overseas. Last year, more than 18,000 gaming companies reportedly folded as China severely restricted game licenses.

With iOS and Android app stores closely scrutinized by the government, some hoped that Douyin and WeChat would be a safe haven for mini games without licenses. With ByteDance now requiring developers to submit game licenses, it looks like that avenue could be closing too.

But Kuhns does see a glimmer of hope for iOS developers given Apple’s influence in the market.

“It would be interesting to see if Apple can use its clout to simplify the process or pressure the government to drop those licensing costs, or create a tiered model for different types of games or company sizes,” he said.

This article first appeared in Abacus News