Microsoft's Uphill Battle For The Chinese Gaming Market

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Steve Anderson
The Video Store Guy
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Microsoft's Uphill Battle For The Chinese Gaming Market

On September 23, a little slice of history will land in mainland China as the Xbox One goes on sale in the country, the first such dedicated gaming machine to be sold in the country since the country established a ban on gaming consoles that went back fully 14 years, according to reports. But even with a first-mover advantage and Microsoft's incredible name recognition and market capitalization, success is not assured. So what's standing between Microsoft and gaming sector dominance in one of the planet's biggest markets? Let's take a look.

On the surface, this should be a slam dunk. The Chinese market represents 1.4 billion people, and Microsoft is set to be pretty much the only console game in town right now. Sony and Nintendo don't have too much room to get involved here, as these are commonly viewed as Japanese companies and there is, at last report, more than a little anti-Japanese sentiment in China. However, there is word that Sony may be planning to mount another attempt to get in, having tried once previously with less than stellar results. But the presence of Microsoft in the field is encouraging Sony to try again, and reports suggest that Sony may be looking to work with a subsidiary of BesTV to get access into the field.

Moreover, there's actually a fairly substantial gaming presence in China to begin with. PC gaming is a fairly big market, as is gaming on mobile devices. Reports suggest the PC gaming market in China is worth a hefty $6 billion, and arcade games are said to also be a fair-sized part of the field. This in turn means that Microsoft will have to compete with alternatives already on the ground, and that could be a tall order.

Worse, Microsoft will be going in with a critical disadvantage: its price tag. The Xbox One in China is set to sell for at least $600 US, at last report, and a 17 percent value-added tax is also said to be in the works. That's going to be a tall order for the Chinese consumer, and it may well be that Microsoft is priced out of the market before it even walks in. For those customers who do step in at Microsoft's pricing, the gamers face an uncertain future content-wise; the Chinese government must, at last report, approve for release every single title in the channel.

Even the government seems to be kind of against Microsoft's presence; unannounced visits and inspections seem to be taking place with an alarming frequency, and an antitrust investigation was said to include a statement from the State Administration for Industry and Commerce group, which featured the phrase that Microsoft was “...not to interfere with or hinder the investigation in any way.” I swallowed hard just reading that, and I have nothing to do with Microsoft besides enjoying many of its products. Reports suggest that the indie market will be in play, but again, subject to the same restrictions that larger-studio releases are.

That's not a very welcoming market. That sounds a lot more like a forbidding market. But the sheer size of the Chinese market is a proposition that's very, very hard to turn down for just about any company. Even if Microsoft can only get one percent of the reported 1.4 billion people therein, that's still 14 million people, and 14 million people at $600 a system is actually more than the current PC gaming market in the entire country. That's no small sum, even if I'm not getting the math right, and represents more than enough reason for Microsoft to put up with some cultural idiosyncrasies and assorted oddnesses. It's also worth noting that this is still early going; Microsoft may be able to soften the field up the farther in it goes. After all, Xbox is still new, not yet a trusted household name like it is over in the United States and the like.

Only time will tell just how this all boils out, but Microsoft could have a major prize on its hands with the Chinese expansion, and that's a prize well worth pursuing.