China’s $66B gaming goldmine: Are brands missing out?

Standing at around 668 million, China’s gamers comprised about half of the mainland’s population last year. So, why does the country’s gaming industry remain largely unexplored by luxury? In June last year, government-run game industry association CGIGC reported that the number of residents in China playing video games had hit record highs, making the country the world's biggest gaming market. Following a Covid-19-induced slump in revenue in 2022, the Chinese video game industry is expected to top a market value of $66.13 billion this year, making it a goldmine for brands looking to diversify their consumer base and crack China’s fervent gaming community. Today, the country’s most popular video game titles rake in millions of users per day – Honor of Kings attracts 100 million daily players, while Genshin Impact boasts a monthly total of over 60 million users. Government intervention “Luxury brands are definitely overlooking significant opportunities within China’s gaming ecosystem,” Philip Driver, founder and CEO of international game marketing agency The Game Marketer tells Jing Daily. “Chinese consumers spend huge amounts on brands, and the demographic of Chinese gamers includes a sizable portion of young, affluent individuals who are receptive to luxury brands.” Brands rushed into global gaming platforms, such as Roblox and Fortnite, en masse last year. According to metaverse data company Geeiq, over 700 brands launched in-game and virtual activations – 400 of which were released in Roblox – in 2023. But with international platforms like Roblox, Minecraft, and Fortnite banned in the mainland, penetrating China’s siloed ecosystem is challenging. Luxury’s hesitancy stems from a lack of understanding, says Driver. “There’s a lack of awareness of the gaming landscape in China and the types of games Chinese players enjoy. There are games [in China] that have millions of players, but have never been heard of outside of the country,” he adds. Charles Hambro, CEO and co-founder of Geeiq echoes this. “There’s a huge education gap between China and Western brands regarding what channels are available for a brand that wants to enter the Chinese gaming market,” he says. Government-imposed restrictions pose challenges, such as controlled screen time curfews (3 hours per day) for younger players, which came into effect in 2021. In 2023, regulatory bodies proposed reducing that limit to as low as 40 minutes per day. “While global games leverage high screen time and addictive algorithms to keep audiences attached to screens, Chinese policy is leading the way in implementing play time limitations to protect younger audiences,” Richard Hobbs, founder of Brand New Vision tells Jing Daily. “Brands will need to consider longevity in the gaming market, rather than a reliance on short-term [activations] and high-hourly activity.” Tried and failed Also, slip-ups are landing brands in hot water. One cautionary tale is Burberry’s tie-up with Honor of Kings in 2021. Initially met with acclaim by netizens, the house’s stance on cotton from the Xinjiang region saw Tencent Holdings (the internet giant behind the game) terminate the deal just days after its release. Likewise, Bulgari x Honor of Kings’ collaboration on digital jewelry was widely anticipated across the mainland last July, before the brand mistakenly listed Taiwan as a separate entity to China. The blunder resulted in a countrywide boycott, with the Weibo hashtag “#BvlgariWho will be the first to terminate the contract” amassing over 34.8 million views. For luxury players, faux pas like these are a rude awakening. “It has become increasingly difficult to predict new laws, or even mandatory guidelines which, if breached, could be very damaging,” says Hobbs. A former employee at Genshin Impact, who requested anonymity for personal reasons, also believes China’s complex political climate can act as a deterrent. “Domestic and international opinions can be contradictory,” they say. “China’s young gamers are usually very pro-China, so when issues like Xinjiang or territory arise, they can be hotheaded, which backfires on the brand.” What do gamers want? Big numbers may imply a huge opportunity for luxury brands, but what do China’s gamers actually want? The response to the Bulgari x Honor of Kings’ project, for instance, suggests demand for luxury in-game novelties isn’t as high as many hoped. The title’s recent tie-up with popular IP Hello Kitty received more online buzz than its Bulgari collaboration; on Weibo, Bulgari’s hashtag garnered 41 million views in the two weeks following the launch, while the Honor of Kings x Hello Kitty topic was viewed over 140 million times in just 24 hours, generating close to 8,000 original posts. “I don’t think there’s much of an overlap between customers of luxury brands and domestic gamers,” John Zhang, a financial analyst based in Shanghai tells Jing Daily. Zhang is one of China’s myriad workers who plays video games in their spare time, averaging around 10 hours per week. Conversely, Hobbs thinks there is, as long as brands are willing to embrace the challenges. “But they will definitely need to have people on the ground with solid connections and guanxi,” he says. To win gamers’ trust, Driver believes more than slapping a logo on a character skin is required. “A lot of brands fail in China as they either copy and paste their Western-positioned campaign or create lackluster, superficial collaborations,” he says. A luxury brand collaboration should offer a unique POV, Driver adds, blending the brand’s culture with a comprehensive understanding of each domestic platform and its protagonists. “This could be creating unique virtual items, sponsoring in-game events that reflect the brand's ethos, or offering virtual experiences that echo the brand in the physical world,” Driver says. Utility also plays an integral role, says the former Genshin Impact employee. “[Gamers] will buy accessories because they have certain attribute buffs, like attack, or different special effects,” they add. Zhang agrees. “I would buy a luxury skin or item if it is unique or has special in-game features,” he says. “I would also like to participate in a branded battle.” A first taste of luxury For younger gamers with less disposable income, a branded accessory or skin is their first taste of owning a luxury product, says the ex-Genshin Impact employee. “Luxury brands are so expensive to buy IRL, it’s much easier to get a branded skin,” they say. “A lot of young people joke about it being their first luxury item.” Launching a physical gaming IP x luxury brand collection could also fare well with Chinese gamers, as long as they provide a valuable use-case, says Zhang. “I would buy physical branded gaming merchandise, but I’d expect it to be useful, such as a gaming mouse or a headset,” he adds. Trending aesthetics, like China’s “gamer girl” boom last year (women make up almost half of the country’s gamers), also offer brands a potential foot in the door. Overall, success in the mainland’s local gaming economy hinges on both dexterity and respect. China’s market may come with bigger risks, but if brands can remain authentic and acknowledge cultural sensitivities, they’re potentially in for a winning streak.

China’s $66B gaming goldmine: Are brands missing out?

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Published March 29, 2024

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China’s $66B gaming goldmine: Are brands missing out?