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Xbox One for China formally confirmed, facing an uncertain future

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.

Xbox Games

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.

Xbox One

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.

Source: Microsoft Via: WPDang

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Reader comments

Xbox One for China formally confirmed, facing an uncertain future

31 Comments

I wonder what other restrictions they're going to be? And would chins allow Xbox live, where separatists could gather to plot?

Uncertain future indeed.

As to Xbox Live, Microsoft is trying to smooth things out over a very long arc. It has found Chinese partners (a plethora of them), to establish an Xbox Live service for Windows Phones. With that legal identity in place, it might be simple to extend the service to game consoles. Or maybe not. Anything could happen in China overnight, if the government suddenly wants so.

A ton of restrictions. So they wont get to play any violet games, racist games, or anything bad about China. So yeah, probably only Kinect games and sport games. :-/

Would have been nice to see a bit more positivity from you guys, why this is good for gamers/consumers in China, like getting the consoles through legitimate sources(many may have no desire to jump through hoops to get them), how it opens possibilities for Chinese game makers to build content specifically for the region(which we then may see internationally) etc etc

A bit hard when there's really no hoop to jump through. Smuggled consoles are sold openly online (and offline too, usually in streets clustered with dozens of video game shops), on the same site where typical a Chinese consumer gets his/her daily garment and snacks. A matter of a couple of seconds, without the need for special knowledge, or strings to pull. The Chinese market (for game consoles) is like a huge villa booby-trapped all over. Being the pioneer, Microsoft is very, very brave. But seriously it takes time to clear a path around the premise. And a portion of Microsoft's effort might benefit Sony and Nintendo tremendously.

So the Chinese government ban these thongs but they can sell them openly in street markers? I'm I missing something?

Yeah, China is a funny place. Shopping malls and street side mom & pop stores are things of different universe. Major vendors are regulated on a daily basis. Sell one banned item, and you are screwed. But the Big Brother only examines small vendors perhaps once per year, even if dozens of them cluster together. If you do care about gaming, it takes just a few mouse clicks or one subway trip to get what you need. Being able to sell Xbox One through legal channels gains Microsoft some extra exposure among the folks who didn't care or know much about gaming.

I'm fairly sure that the Chinese who have a smuggled ps4 or Xbox one, also has ways to access American Netflix, via services that hide their true ip address...

They'll get every American content for free through their hacking skills. Then they distribute to all their friends.

I've been to China and the they had some game places where you could play board games and Xbox 360. My friends were crazy about the Kinect games, so MS might actually have a shot with this kind of games.

I'm worried about this. If it takes off in China, then that market might become so big that games decide to sell the censored Chinese version everywhere instead of making two different games.

Side note: I ❤ Red Alert and Mafia

Um.... Yes it does? If the market for censored games becomes bigger than non-censored, it would be cheaper to just put the censored version everywhere.

It wont. China is China. The US market wants, and allows, alot more than those commies. If anything China will have games changed to suit their restrictions, not vice versa.

Yeah never going to happen. Games are censored and changed in small ways for most countries anyway. we've had so many censored games in Australia. But if they sold one highly censored game world wide instead of just china, they might sell a lot in china but then risk losing sales in other countries

It doesn't take a whole lot of effort to change cencored parts of a game to non-cencored.  They would still make a profit by releasing two different versions.

I don't understand why WP central is portraying this negatively. Typical yank hypocritical attitude. What if there were a game showing 'terrorists' positively and dispatching American soldiers with impunity. Or a game that was not in line with western ideology. I'm sure such games would be quite popular in many parts of the world. Would the US regime allow such games. Would there not be censorship. Why act all holier than thou?

Have you played Metal Gear Solid V: Ground Zeroes? The whole thing takes place on an American base in Cuba populated with American soldiers.

No sir, this is not yank hypocrite, but a Chinese dude telling you what kind of pain in the ass we've been living with for the past decade. As to censorship, there's a usually this "all or nothing" argument floating around, going like "Well if you can't have 100% liberty, you are not any better than anyone else. 90% liberty or 19% liberty, no difference, imperfect anyway." For the American censorship, at least it tolerates games with ultra violence, conspiracy theory, and not to mention blowing up national pride stuff like the White House.

Plus, there are already too many clueless foreign journalists being overly positive without knowing what exactly the Chinese gaming market is like. I guess it's necessary to remind people to not only judge the market's theoretical potential by figures and charts, but also have a look at the reality.

And guess I should mention that Sony tried to do exactly what Microsoft is doing right now, back in 2004. Back then Sony acquired everything they need by pulling strings, and even released a small batch of PlayStation 2 (model 50009) in the Chinese market, under the name of "home multimedia entertainment system", avoiding mentioning of "games". It didn't last for long though, partly because the government changed its ideas, partly the fact that it's terribly hard to get many games pass the censorship. I reckon the Chinese PS2 launch with a grand total of TWO games, and over its brief life cycle there were less than 10 games released for the market. Finally Sony decided to just give up.

One other big challenge MS is facing is piracy in China. Almost every smuggled console has been hacked to be able to read pirated copies of games, providing a hack is available on the platform; since consoles were not officially released in China before, there's no such thing as XBL China yet, no one really bothers to go online to get banned. You can easily get a bootleg for $1 in those mum & pop shop.
If I were in the market department of MS, I would go for a subscription based sale strategy in China, just like the MMOs, because once XBOX ONE hack comes out many users would go for pirated copies. Subscription at a reasonable price can make sure that they stay paying MS for games.
I'm Chinese and I live in the US now and I buy authentic copies of games. I used to buy pirated games when I was in China

Hey bro. Chinese relocated to the US here, too. Personally I'm not too worried about piracy any more. The Chinese market is definitely getting better on this front. Thanks to Microsoft, Chinese console gamers now have realized Xbox Live is a massive enhancement to gaming experience, and tinkering with their consoles could have them permanently banned from the service. Plus, Xbox One hasn't been cracked the last time I checked. Piracy's still a problem as of now, but sure there's an increasing number of people buying proper games from the smugglers. And aided by China's inflation, $60 (360 RMB) for a game isn't much of a problem to typical middle class these days. If only Microsoft could build up a decent enough game library for the Chinese Xbox One...

They probably let this happen because there is not a lot of games on this "console". Tv tv tv.