As expected, Microsoft just formally announced Xbox One for the Chinese market in Shanghai. You could call this an event of historical significance, because game consoles have been banned indifferently in China for the past 14 years. Xbox One is the first to break the ice, now that the ban has sort of loosened a bit.
Unlike product launch elsewhere, Microsoft is navigating through a tricky situation to bring Xbox One to China. Firstly, the Chinese government’s ban on game consoles isn’t really lifted yet. The country just created a Free Trade Zone in Shanghai (“SFTZ” for short), where enterprises enjoy more freedom in business. It’s within this specific zone that the ban is loosened. Microsoft has formed a subsidiary within SFTZ, in joint-venture with its Chinese partner BesTV, an IPTV content provider. The subsidiary’s special SFTZ status supposedly allows it to sell Xbox One to the rest of the country.
This is not terribly bad for Microsoft though. Every other game console maker will have to deal with the same pain, if it wants to extend business to China. According to the announcement made by Microsoft and BesTV, Chinese consumers will get Xbox One consoles through retailers by September this year. Microsoft is gaining a head start advantage on Sony and Nintendo as of now.
With the long console ban just loosened, China seems to be a gold mine to console makers. But that is not the whole picture. Microsoft, or any other console maker, will have to face a few challenges before having any commercial success in China.
Problem one: What games will be available for those consoles?
China does not have a game rating system, and to make the matter worse, content censorship is pretty harsh over there. The combined effect is that a game could be banned any time for any random reason. From the top of my mind, I can immediately name several reasons that could kill a game in China:
- For damaging landmarks of national pride (Command & Conquer: Generals, nuking the Tian’anmen Square in the Chinese campaign’s opening cutscene)
- For killing Chinese soldiers (I.G.I. 2)
- For portraying China (the country in general) not-so-positively (Battlefield 4, plus killing Chinese soldiers)
- For visually representing violence (Grand Theft Auto). Ironically, Mafia, a game in similar genre and style with GTA, was considered appropriate and imported.
- For attacking the socialist/communist ideology in general (The entire Red Alert franchise)
Plus, the Chinese government famously made Blizzard and its Chinese partner glue flesh to skeletons and replace all dead bodies with sacks in the Chinese version of World of Warcraft, on the grounds that “Yuck, that’s gross and horrible. Not good for kids.”
Worst case scenario, the Chinese Xbox One could become a walled garden populated mostly by "from Chinese, for Chinese" homegrown titles.
As we know, console makers generally sell the hardware at a certain loss, in order to build up a momentum and profit from the sales of game software. China’s “500 million gamers” are largely players of mobile games or PC MMO games. They don’t automatically convert into console owners, especially if the console’s game library is smallish.
Problem two: Demand
You think just because game consoles have been banned for over a decade, Chinese consumers would now be overjoyed for the availability of Xbox One? That would be so wrong. China has one of the world’s most advanced black market, where everyone has access to things that technically shouldn’t be there, at reasonable cost and minimum risk.
Have a quick search for “Xbox One” on China’s most popular online shopping website, immediately you get over 3,000 items smuggled from Japan, Hong Kong, Taiwan, Europe, and the United States, of course. The price ranges from 2,500 RMB ($400 USD) to 3200 RMB ($512 USD), including tax and everything, that is. Personally I wonder how Microsoft is going to compete against itself. The TV functionality seems to be the only advantage the Chinese Xbox One has. They are supported by BesTV’s video streaming service, while smuggled machines basically have nothing (One Guide won’t work in China. Hulu, Netflix and Amazon Instant Video are not available in the Chinese market).
Of course, Microsoft might not be so concerned about it. After all, an Xbox One sold is an Xbox One sold, doesn’t matter if it’s sold in China, or sold in the United States then smuggled to China.
We will keep you posted about the development of Xbox One's adventure in China.