Don't expect big thrills in China's looming console war

When Sony's PlayStation 4 finally enters mainland China this month, it will bring a major global console fight to a country that hasn't seen one in a long time.

Game consoles were banned in China from 2000 until 2013, but as the PS4 goes up against Microsoft's Xbox One in China it will face myriad other challenges including disinterest.

Sony announced this week that the PS4 and the PS Vita will launch in China on March 20, two months later than it originally planned. The PS4, which has sold 20.2 million units worldwide through the end of February, has been a pillar of strength for Sony as it struggles with unsuccessful ventures such as PlayStation Mobile.

Microsoft's Xbox One, which had sold 10 million units as of last November, has a six-month head start in China since sales began there last September, but a number of factors make picking a winner in this corner of their global showdown challenging.

For one, the two consoles won't have competing distributors, meaning there's less pressure to sell. "PS4 and Xbox One are ultimately distributed by the same company, Shanghai Media Group (SMG), which is 50 percent owned by the government," Lisa Hanson, an analyst with Niko Partners, said via email. Xbox is distributed by BesTV New Media, a subsidiary of SMG, and the PS4 will be distributed under a partnership with Shanghai Oriental Pearl Group, also owned by SMG. A merger for the units was announced last year.

Since the government restricts graphic violence and other themes on all gaming platforms, there is a limited number of titles available for the consoles. As both are expected to be region-locked, meaning the machines can only play games released for China, the domestic availability of titles will influence demand. So far, Sony has only announced six titles for the PS4 in China, including Dynasty Warriors 8.

"The games lineup at launch appears thin and not particularly compelling," Lewis Ward, an analyst with IDC, said via email. "Some of the games are already available on other platforms and the price of PS4 game discs is high given the standard of living in China."

Indeed, many Chinese gamers go to Internet cafes to indulge their passion for "freemium" multiplayer online games that are free to play but offer additional features for a small fee. Those gamers would find the 2,899 yuan (US$463) up-front price of the PS4 too high, not to mention the Xbox's 3,699 yuan without Kinect, which turned off local gamers last year. But the sheer size of the Chinese market means that the wealthy minority that can afford consoles is still a big opportunity for Sony and Microsoft.

"The main reason freemium games are the bedrock of Chinese gaming is because it's an effective means of combating endemic illicit software distribution," Ward wrote in a recent research note, adding IDC expects PS4 and Xbox One to sell far fewer than 1 million units in mainland China, combined, in 2015.

PS4s are already in China mostly through grey market imports from Hong Kong and Taiwan. Grey market consoles will likely be unlocked, meaning they can play games that will be restricted on the officially sanctioned versions of gaming consoles. It's one more thing that makes the official release less attractive to serious gamers

Meanwhile, Android-based TV set-top gaming devices, which are relatively cheap and gaining ground, are another option. And while mobile gaming on Android and iOS platforms has become increasingly popular on the Chinese mainland, that may not provide a foundation for success for the PS Vita, Sony's handheld gaming unit.

"Sony is offering the Vita in China and that device could have some appeal, but overall dedicated handheld gaming devices typically don't sell well against the more ubiquitous smartphone and mobile game apps," Brian Blau, an analyst at Gartner, said via email. "Given Sony's lead in console sales, I would not be surprised to see them have the same ration of success in China once this initial launch period has passed."

Tim Hornyak covers Japan and emerging technologies for The IDG News Service. Follow Tim on Twitter at @robotopia.

Tim Hornyak

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