Last month, the Chinese government issued service permits for two domestic games. Having effectively blocked the entry of Korean games, China has been issuing permits for domestic games since 2022. Notably, permits that were previously granted mainly to large game companies are now also being issued to mid-sized and small game companies, raising expectations within the industry.
◇ NEOWIZ and Gravity obtain permits... a total of five games this year
According to the National Press and Publication Administration (NPPA) in China, the agency announced on the 9th that it issued foreign investment permits for 14 foreign games on the 21st of last month. A game permit is a type of service license issued by China for games released in the country. It is essential to obtain this permit to sell in-game currency. There are two main types of permits: domestic permits (issued to games in China) and foreign permits (issued to overseas games). Among domestic games, NEOWIZ's "Cat and Soup: Magic Recipe" and Gravity's "Ragnarok: Adventure of Promise" are included in the foreign permit list.
"Cat and Soup: Magic Recipe" is a sequel that utilizes the intellectual property (IP) of "Cat and Soup," developed by NEOWIZ's subsidiary HIDEA. The original "Cat and Soup" is an idle simulation game where various cats gather in the forest to cook and sell ingredients. This game received a permit last year and was selected as a top 3 in the Google Play Indie Game Festival in 2021. Although "Cat and Soup: Magic Recipe" has not yet been released domestically, the issuance of a permit is expected to boost its development.
"Ragnarok: Adventure of Promise" is a collaboration between Gravity and the Chinese game development and publishing company Kingnet. Based on the world of the original "Ragnarok Online," it features a single player who can unlock up to five characters and develop multiple characters. Through this game launch, Gravity plans to expand the influence of the Ragnarok IP in China. Gravity had also obtained a permit for "Ragnarok: First Class" back in January. Gravity has been securing permits for Ragnarok IP games annually in China.
After the Hallyu restriction policy was imposed in 2017, the Chinese government, which had not granted permits to domestic games, resumed issuing permits for Korean games in 2022. Notably, permits that were previously issued mainly to large game companies are now showing a trend of being granted to mid-sized and small game companies this year. This year, the total number of permits issued for Korean games reached five, including the two issued last month, all of which were for mid-sized and small game companies. In January, permits were granted for two games: CookApps' "Fortress Saga" and Gravity's "Ragnarok: First Class." In March, CookApps' "Unnamed Knights" obtained service permission in China.
Last year, permits were issued to major game companies. In February, permits were given to Nexon's "Dungeon & Fighter Mobile," NEOWIZ's "Cat and Soup," Netmarble's "King of Fighters Allstar," and Gravity's "Ragnarok Online" PC version. In June, Pearl Abyss' "Black Desert" PC version received a permit. In October, NCSOFT's "Lineage 2M" and SHIFT UP's "Goddess of Victory: Nikke" were approved, and in December, permits were granted for Netmarble's "Seven Knights: Raise Up," Neptune's subsidiary Nimbly Nuran's "Eternal Return" PC version, and Gravity's "Ragnarok Reverse."
◇ Expectations rise for mid-sized and small game companies... "Uncertainties and risks are high in China"
Expectations for a rebound in performance among mid-sized and small game companies struggling domestically are rising. China, the world's second-largest game market, is seen as a land of opportunity for the domestic gaming industry. Last year, China recorded $123.6 billion (181 trillion won) in the global game market. As of 2023, China has approximately 668 million gamers, making it the largest export market for Korean games. According to the Ministry of Culture, Sports and Tourism, as of 2023, China's share of game exports stood at 25.5%, securing the top position. Southeast Asia (19.2%), Japan (13.6%), and North America (14.8%) followed.
Some point out that the Chinese market still poses significant uncertainties and risks. Even if a permit is issued, there are cases where games are not launched, resulting in the inability to receive royalties. Wemade has stated that it has not received about 840 billion won in royalties from Chinese game companies such as Shengqi Games and Shanghai Kingnet for "Legend of Mir 2."
An industry source noted, "Entering the Chinese market is a critical indicator that can rebound performance, so obtaining a permit is important," but added, "Unlike in the past, the quality of Chinese games has improved, so securing a permit for domestic game companies does not guarantee box office success." They further remarked, "In China, it doesn't matter whether a game company is a large corporation or a mid-sized or small company; the companies that effectively target Chinese users will ultimately achieve significant performance gains."