My major quest, aside from the business I was there to conduct, was to shop for video games and speak to locals about them. It's fairly easy to read about China's video game market, but it's another thing entirely to experience it in person.
On my first attempt I visited a prominent shopping mall that caters to upper-middle-class Chinese. My research told me that it had an arcade, an electronics shop, and a DVD shop.
By "arcade" they apparently meant six racing stations from the mid-90's (labeled in Chinese and I didn't recognize the attract screens), a whack-a-mole style game of multicolored buttons at which was seated a screaming three-year-old, and a claw game filled with the exact same stuffed animals you'd see in the States. (My guess is that they're all made in China anyway.) The area was stuck into the far back corner of the top floor of the mall. It was poorly lit, the floor dirty, and the games sandwiched between toddler's clothing, men's restrooms, and the food court. The screaming 3-year-old and her mother were the only customers.
Electronics were housed in much better conditions, but there was no gaming equipment to be had. Cameras, HDTVs, and iPods ruled the day.
By "DVDs" they meant "Chinese movies," and nothing else.
For my second attempt, I went to a downtown mall that catered to upper-class Chinese and foreigners. The ground floor held brands like Cartier and Coach, and the high, fixed prices implied that they were the real article. On the fourth floor there was a quarter of a shelf, unlabeled in any language, squished between yoga DVDs and coffee table books. It contained twelve video games: two Chinese titles (I don't read Chinese so don't ask me what they were), nine Japanese titles that seemed to be sequels of two separate series, and World of Warcraft. Average price for each game was 69 yuan, though there was a casual Japanese game at 29 yuan and a big boxed Chinese special edition at 129 yuan. World of Warcraft had no pricetag.
My third attempt was to find an independent gaming store, and at this I failed utterly.
On my fourth attempt, I went to a famous shopping plaza that sells nothing but knock-offs. Samsonite luggage: $8. Armani coat: $40. Coach bag: $12. (For added irony, the entire front of the building is covered by a giant poster of Jackie Chan, with the caption "Say no to piracy!" in three languages.) And there, in that den of illicit opiates of the masses, lay my video games and consoles. Half a mall-sized floor of merchandise: PSPs labeled at $60, DS Lites at $40, and any game you can possibly name for 10 yuan ($1.43) or less. PC games, console games, hardware, software, accessories, toys, you name it, it's yours for the haggling. (No, I didn't buy any.)
My fifth effort was an interview with a local man, courtesy of a consumer products survey company. I went to a "home check" with an interpreter and spent an hour and a half asking questions about the gentleman's buying habits, his friends, living situation, social status, etc. He owned a computer that doubles for him as a television, and spends his time reading or watching news, blogging, or playing either casual games or - get this - Counter-Strike.
After some probing, he admitted that it wasn't actually Counter-Strike; it was a Chinese game "similar to Counter-Strike" that he plays with his friends several times a week. (Though he was familiar with LAN parties, he said it was easier for them simply to organize times to play from their own homes.) I asked where he had bought the game, and how much he had paid. At this there was some back and forth with the interpreter, and eventually the answer came: he downloaded it online for free. Which is what he does with all of his media content: movies, television, video games, etc. He does not own any boxed copies of anything. He wouldn't answer whether or not he pays a subscription fee, but did state that he has never shopped online - for anything - nor has anyone he knows. He seemed surprised by the question, and actually laughed at the idea.
It's easy to read about the 96% piracy rate in China, and the regulations that make importing consoles all but impossible. As someone whose livelihood depends on people not stealing the content we produce, it's also easy to get, shall we say, irked. The reality of the system in China is that legitimate software is so expensive and so hard to find, and pirated software so cheaply and easily available, that it would be bizarre for Chinese gamers to not pirate. If I lived there and wanted to play games, I'd have to pirate them too.
It's also easy to point a finger at the Chinese government. Their protectionist policies, which I'd venture to state are in direct violation of their WTO responsibilities, hamstring foreign companies from legitimately doing business. Domestic companies don't yet have the expertise to compete with the likes of Nintendo and EA in a fair marketplace. (But they've had enough time under WTO rules for the training wheels to come off.) Yet while China has seemed inscrutable and impenetrable to many Western industries and companies, it has been quietly building credibility with Asian and African neighbors as a responsible partner. Changing the business environment may be difficult, but not impossible. (I highly recommend China: Fragile Superpower for general insight on this.)
More difficult to overcome is the problem of retail distribution. None of the burgeoning class of big-box retailers in China have cracked the code of video game sales. Chinese consumers don't yet seem comfortable with online purchasing in any form. Boxed copies are only available in pirated form, and digital copies are only available through P2P sites. Imagine trying to watch movies in a country without Blockbuster, Netflix, or HBO; you're left with bittorrent and a DVD burner whether you care about piracy or not.
(And for the record: abstaining from piracy in that environment might be more ethical, but it does not make you a paying customer. It makes you a non-gamer and therefore of no more financial use to the industry than if you'd downloaded illegally.)
Yes, we can change business models to subscriptions, pay-to-play, and microtransactions. This seems to work out well for the domestic MMO companies and of course for WoW. It works particularly well for internet cafe usage, just as in South Korea, which has many of the same problems. I'm betting it doesn't work out so well for Valve, which is not seeing a single yuan from my Chinese friend playing either Counter-Strike or its Chinese knock-off version.
So the problems here, just to name a few:
- Significant taxes and regulatory hurdles on imported games hardware and software
- Lack of consumer confidence in or awareness of online purchasing
- High pricetag of legitimate software versus pirated software
- Easy creation of and access to pirated software and smuggled hardware
- Ineffective retail distribution system for boxed software
- Lax consumer (and presumably government) attitudes toward piracy
Why is it so easy to pirate our software? (And simultaneously translate it into Chinese, no less.) Why is our software priced so highly in developing markets? How can we create retail distribution channels for boxed copies? How can we create consumer confidence in online purchases? Has any of us filed a complaint with the US Trade Representative to the WTO? Are there domestic Chinese companies we can partner with to get our hardware imported legitimately? How do we shut down the smuggling? How much time and money would it take to educate consumers that piracy is bad? (I suddenly envision a "Jackie Chan will kick your ass" campaign.) Would increased boxed-copy sales impart a sense of value on software, such that consumers equate piracy with theft? How would we assure consumers that online purchasing is safe? How would we make sure that it is safe behind the Great Firewall?
Some throw up their hands and declare that the China Problem is unsolvable, that's it's just how things are, and no one can change them.
I respectfully disagree.
2 comments:
When I was in Dongguan earlier this year I was informed that the average monthly salary for a factory worker equated to about $50USD.
Solve that problem first.
Trying to get people to pay for games that companies stateside typically charge $50 is not a goal worth having.
There are enough other people to tell you that concepts of intellectual property, copyright, physical media sales and such are outdated, they're just not becoming obsolete at the same rate everywhere in a global sense. However, I think everyone can agree that a living salary is vital to anyone.
-grey
Absolutely, the salary levels are significantly lower in China than in developed nations. Prices are similarly lower; it's not as if the factory worker is trying to get by on $50 a month in New York, or even Montana. He probably pays about $1.50 for a pair of shoes, 20 cents for a haircut, 10 cents for a bus ride home. However, it still doesn't give him a great deal of discretionary income, even by percentages. Without doubt, he lives in very substandard conditions that need to be improved. That factory worker is probably not even within our target demographic yet. And he doesn't have to be; video games are a luxury item, not a living necessity. But in China that worker's $100 a month supervisor might be of a high enough income level to afford our products.
You're also right that it's totally unreasonable to expect that worker or his supervisor to pay $60 for a copy of Halo 3. In fact, the prices of the Japanese games I saw at the mall were in the $10 neighborhood. It's more reasonable, but still high for the typical Chinese consumer. One of the questions I raised was why games are still priced out of the budget of consumers in developing nations. I'm sure there's a logic in it, I just don't know what it is or how it can be altered to accommodate emerging markets.
I disagree that the concepts of intellectual property and copyright are outdated. They certainly require new models of thinking about them and different forms of protection for them, but the basic idea is still a cornerstone of our ability to do business.
Physical media sales issues are debatable; I believe that they still have a place in the market. Not all customers want digital downloads for everything. Many target markets place strong value on physical assets. Paper catalogs look old-fashioned but are a proven successful means of selling casual games to their 30+ female market. Where online purchasing is not trusted or feasible, boxed copies may be better able to penetrate the market.
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