Key Points:
· China’s online PC gaming market growth in 2015 slowed to 11% year on year (y/y), after a 16% y/y growth in 2014. The market hit $13.8 billion in 2015.
· Only two of the major publishers, Tencent and NetEase, saw growth in sales in 2015.
· Tencent was responsible for a massive $8.5 billion in consumer spending or 62% of the market.
· Diversification into mobile games is now a major disruptive threat to PC-based businesses.
· IHS forecasts spending on online PC games to reach $14.8 billion in 2016, allowing China to easily maintain its lead as the number one PC gaming market globally.
IHS Technology Analysis:
China’s online PC gaming market growth slowed to 11% y/y in 2015 in contrast to 16% in 2014. Continued market growth was a result of strong performance from existing titles, such as Dungeon & Fighter, League of Legends, and Blade & Soul, from Tencent, and the Westward Journey series from NetEase. New releases also aided growth with the launch of some highly anticipated games, including Call of Duty Online, Moon Blade and Heroes of Storm.
Only two of the major Chinese publishers, Tencent and NetEase, generated growth in sales value in 2015. Tencent has strong distribution channels, network scale, user acquisition potential and established titles to continue to drive growth in its PC-games business. IHS predicts that its market share will continue to consolidate as a result. Tencent’s dominance in the online PC gaming market in China is reminiscent of Blizzard’s Western-based dominance following the launch of World of Warcraft in 2004. NetEase held an 11.5% share of the market in 2015. With the strong release of Heroes of Storm, Diablo 3 and Revelation, it achieved a yearly sales value increase of 10.2% and maintained its market share.
Diversification into mobile games is now a major disruptive threat to online PC-based business. Mid-tier companies that are unable to compete with the dominance of Tencent in the PC games space continue to diversify away from PC gaming to the faster growing mobile games opportunity. The success of mobile versions of Tian Long Ba Bu and Fantasy Westward Journey has encouraged PC games publishers to adapt popular PC games to mobile platforms. IHS data shows that PC-adapted mobile games accounted for 60% of the content pipeline of major PC game publishers in China in 2015.
