TV game industry's China dilemma
Bound to taxation policies strain and foreign video game behemoths'
indifference to China's market, video game in China is facing an awkward
dilemma: the formidable mismatch between demand and legal supply. Hence the
flourishing underground smuggling biz finds the most lucrative loopholes on the
industry profit chain.
Xiao Wang, a hardcore TV-gamer, intends to run his own TV games gadgets shop
in Gulou (drum tower) street where video game business is crowned as kingpin
community industry. "Among the cutting-throat competitions from other vendors, I
have tried my very best to unearth a trustworthy supplier, but my efforts come
in no avail." Wang shakes his head, seemingly desperate to drop his brainchild
with an initial budget of 100,000 (US$129,014).
Sony's
PSP (Play Station Portable) on display, the price tag reads 1980 yuan
(US$225.7). [File phto]
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"Barely with any exception, all the game consoles sold in mainland market are
contraband." Wang says, referring to PS (Sony's Play Station), PS2 and the
gamers mostly-talked PSP, PS3 and Microsoft's XBOX 360.
As an industry insider reveals, there are roughly thousands of commercial
entities running TV-game related business at varied scales across China. Beijing
alone, in particular regard, has several hundreds stores. As for an individual
TV game console and accessories vendor, attaining a daily average turnover of
roughly 3,000 yuan (US$387) is just a piece of cake, given that TV game industry
is in its heyday now in China. "That is a multi-billion huge trove of money," he
says.
Loopholes on the profit chain
Ironically, smuggled game consoles sold on mainland find themselves in such
solitude that there is almost no authorized equivalent coming across border
through legitimate channel, although their popularity has reached its frenzy
high.
Unreasonably high tax imposed on imported games consoles and TV game industry
giants' negligence to China are the mostly-blamed foes, China's TV game fans
always complain. According to China Business Post, their anonymous industry
source confirms that most of the smuggled game consoles are making their headway
from Japan and other western markets, where the inflicted tax is comparatively
much lower than in China. "Hong Kong is also an ideal source."
Then the so-called 'premature cores' games consoles embark on Guangzhou and
Shenzhen's turf, where they get installed and then wrapped up and packaged with
homegrown materials. That is to say, as China Business Post deduces, it takes
more than 3 to 5 steps before a PSP or whatever game console to reach its
ultimate consumer. "That's the reason that Chinese gamers have to pay extra
several hundreds yuan to get their beloved game consoles, that's unfair indeed."
Wang says.
As a matter of fact, those 'headstream' smugglers grab the fattest tranche of
profits, after several layers of profit peeling, the downstream vendors can
churn up only a thin slice of profit, "Basically about 50 (US$6.5) to 100
(US$12.9) for every sold game console." Wang says.
Consequently, for most TV game shop proprietors, accessories are prioritized
No. 1 cash cow. Accessory sales generate an aggregate 70% profit for TV game
industry, China Business Post compiled data shows, counterfeit and shoddy
products grab the majority of market. Xiao Wang explains, citing HORI screen
film (film to protect PSP screens from scratch) as an example, "genuine HORI
screen film is already extinct from the market, with money-driven inducement,
every vendor is marketing expansive fake HORI screen films."
Another choice to make good deal on TV games consoles is the 'refurbishing'
business, lots of unscrupulous smugglers collected used or recycled game
consoles from abroad at 'trash price', they transport such loot into their
refurbishing bases mainly located in Guangdong province, "they have the machines
face-lifted and renewed" Xiao Wang says, and price such game consoles relatively
lower, "what is funny is that, it sells really good!"
Freak industry
TGBS.COM, a Chinese online community enjoys acclaimed prestige of Chinese
domestic gamers, brags that it receives a daily PV (page view) of 1 million,
"it's only a tip of an iceberg," so says the website's editor, Yang Rui, when
being asked to scale Chinese game fans population. "It is definitely an
astonishing figure, and I am sure both Sony and Microsoft will have their jaws
down when they see the real number." Yang smiles.
The status quo of TV game industry makes perfect seedbed for game-related
software piracy, "I think it's quite understandable," says Yang Rui, for most
gamers, they are paying too high a price to take home consoles they want,
herewith they are reluctant to pay another considerable sum to get authorized
software, "moreover, only 5 yuan (US$0.64) priced pirated game software really
nullifies one's IPR protection awareness, given that authorized software costs
hundred-times more than that sum."
There is a huge imbalance between demand and supply, especially legal supply.
Industry insiders' patience is wearing thin as they have kept longing for
industry policies and regulations for years, albeit TV game industry is still
outside IT watchdog's supervising radar. "I hope my game consoles can one day be
granted legal identity," Xiao Wang concludes.
Xiao Wang has reason to embrace optimism, since China is churning out more
sophisticated development strategy for its TV game industry, with one hand on
enhancing homegrown TV game industrial capability, the other on iron-fisted
crackdown on electronics products smuggling and software piracy.
Is Chinese TV game's dawn looming soon? Let's wait and see.