Can Korean game companies reenter Chinese market?
By Kim Hyun-bin
Korean game companies such as Nexon, NCSOFT and Netmarble all have their hopes up for the possibility of receiving a Chinese license that would enable them to sell their games in the world's largest game market.
But although Beijing gave the green light to local game company Com2uS earlier this month to export its game “Summoners War: Sky Arena,” no one knows for sure which game will be in line to receive the next approval or if there will be any further licenses granted.
The recent approval comes four years after the company applied for the license with the Chinese regulator in 2016.
“We are not sure why Com2uS's game got the approval. Most large game companies register for the license upon a game's release and still continue to do so. All we can do is just wait and hope for the best,” an industry official said.
Korean game companies have been banned from exporting their games to China since March 2017 after Beijing stopped issuing licenses when Korea decided to deploy a U.S. Terminal High Altitude Area Defense (THAAD) missile defense system on the peninsula.
China has strongly opposed the deployment as the THAAD's X-band radar has a detection radius of 2,000 km putting not just all of North Korea but also Beijing's airspace under its reach.
It is imperative for local game companies to reenter the Chinese market as it is the largest in the world amounting to around 40 trillion won ($36.5 billion).
Industry watchers say the latest move could be a positive signal for local Korean game companies looking to reenter the Chinese market.
"Receiving a license from the Chinese government is definitely good news for the local game industry, which has been struggling for years. However, we need to take a cautious approach to the matter as this could end up short-lived," an official from the Korea Association of Game Industry said.
Local game companies are carefully following up on the issue, but say China is highly unpredictable making it nearly impossible to predict the country's next move.
“There are great uncertainties and we believe it will take time for the ban to be totally lifted. The evaluation criteria of the Chinese regulator's licensing procedures are unknown and it is up to them to decide which company to give licenses to although the companies might have similar specs and qualifications,” a major game company official said.
Some industry watchers believe early speculations by the local media of the ban being lifted could have had a negative impact on the issue.
“Once the Summoners War: Sky Arena game was given the license, all the media and press wrote about the Korean game ban being lifted by China which could have angered Beijing as they are the only ones with the authority to lift the ban,” another official from a game company said. “Now the Chinese could further extend the ban. That is why game companies are cautious and conservative when addressing the issue as Beijing is hiding its true intentions.”
Korean gov't needs to step in
Industry watchers and academia are urging the Korean government to be more engaged in the issue and put more pressure on Beijing to lift the ban.
“Even if the Korean game companies receive licenses from China they will meet diverse regulations from the Chinese government. That is why the Korean government needs to take a leading role in resolving the license ban issue,” Rep. Kim Seung-su of the People Power Party said.
The Ministry of Culture, Sports and Tourism in charge of the issue has been sitting idle even nearly two week after the first license was issued on Dec. 4. The ministry did not release an official statement on the issue, or address its role or efforts in the outcome.
Many political experts believe the ministry is sitting quietly as it had no part in the recent actions by China.
“I don't believe the ministry had a role in the recent game license approval as it failed to release a statement on the issue,” a political official said.
In 2018, even after the license ban, China accounted for 30.8 percent of Korea's total game exports followed by the U.S. with 15.9 percent, Taiwan and Hong Kong with 15.7 percent each and Japan with 14.2 percent.
And although Korean companies could not enter China's massive game market, Chinese companies have been raking in sales in Korea with minimal restrictions.
“Korean game companies need to partner up with Chinese gaming companies to release their games in China, from which the Chinese firms take a large cut of sales profit,” an industry official said. “However, Chinese firms have no trouble launching their games in Korea with little government restrictions.”
The industry and academia has been continuously urging the government to respond with countermeasures, but the government has been unable to implement any effective measures for the past four years.
The culture ministry has been under continuous scrutiny in government audits. “As a matter of principle, the government should place restrictions on Chinese companies or commence litigation via the World Trade Organization (WTO),” Rep. Cho Kyoung-tae of the People Power Party said.
The minister at the time, Park Yang-woo, said he would “review the WTO legal procedures” but nothing has progressed since then.
In the government audit this year, Rep. Kim Seung-su asked “did the culture minister fulfill any articles requested from last year's government audit?” However, the ministry replied there were no definite results from its efforts.
In July, the culture ministry announced it would expand esports exchanges with China but there was no mention of a lift on the ban.
Many experts believe Korea is hesitant as it is afraid of provoking powerful China.
“The Moon Jae-in administration has been working to enhance inter-Korean relations through China, as Beijing has massive influence over the Kim Jong-un regime,” a government official familiar with the matter said. “So they do not want to provoke China in any way.”