November 9, 2009

Gaming Regulation and Government Policy [8:32 am]

Chinese Agencies Struggle Over Video Game (pdf)

On Monday, the Chinese General Administration of Press and Publication ordered the Shanghai-based operator of World of Warcraft, NetEase, to shut down its servers for World of Warcraft. The agency said that it had rejected the company’s application to become the new host of the game’s four million Chinese players.

But by Wednesday, the Ministry of Culture had struck back.

“In regards to the World of Warcraft incident, the General Administration of Press and Publication has clearly overstepped its authority,” a ministry official, Li Xiong, was quoted as saying in the Economic Information Daily, a newspaper in Beijing. “They do not have the authority to penalize online gaming.”

The ministry said it had that authority. And it said NetEase was perfectly free to offer the game on computers in China. The matter now appears destined for settlement by the State Council, the Chinese government’s cabinet.

Such bureaucratic hair-pulling might seem petty, were so much not at stake. Why the authority to regulate video games should trigger such a fracas is not altogether clear. But on its face, the defining aspect of the dispute involves money.

The online gaming industry in China is already huge, and growing fast. About 50 million people crowd the Internet cafes of China on a regular basis to play. Revenues in 2008 rose about 50 percent to at least $2.9 billion, according to Alicia Yap, a Hong Kong analyst for Citi Investment Research and Analysis. That is 10 times the revenue of just five years ago. IDC, a research company, has predicted that annual revenue will reach $6 billion by 2013.

In that context, the question of who decides what games go online — and how they decide — looms large. It is perhaps especially important for game makers outside China, who have had trouble cracking the vast Chinese market.

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