HONG KONG: Microsoft is stocking up on Chinese video game content to pursue Sony Group’s success with Genshin Impact, sources say, solidifying China’s transition from a player-only country to a hub of blockbuster developers.
The US software giant and Japan’s technology vanguard has been offering a lot of money to small developers to maintain programs and license titles for several years now, but Genshin Impact’s impact has added a sense of urgency, sources say.
The action role-playing game from burgeoning Shaghai studio miHoYo has generated billions of dollars since its release two years ago, raising the bar in multi-player, cross-platform games — the type sources said Microsoft and Sony are looking in China for their game Pass- and PlayStation Plus subscription services.
Growing Western interest in Chinese games reflects a maturation of the Chinese game development industry, analysts say. Chinese games are now comparable to big-budget western games, said Daniel Ahmad, senior analyst at researcher Niko Partners.
“Chinese game developers are trying to standardize their development tools, create advanced production processes and invest in really large-scale teams,” Ahmad said. “Ultimately, that gives them the competitive edge to reach a wide audience, both in geography and platforms.”
Microsoft has built a team to scout Chinese games, according to two industry sources. The Xbox maker has mainly filled its subscription list with titles from major brands, but is now even chasing independent studios with big-money deals, they said.
At the same time, the files showed Microsoft is expanding its subscription service to personal computers and handheld devices, increasing the appeal of Chinese developers like miHoYo, who have built a reputation for multi-player, cross-platform compatibility — with Genshin Impact being a first-of-its-kind example.
An executive, whose studio signed a licensing deal with Microsoft three years ago to release its game on Game Pass, said the US company recently offered a licensing deal many times larger for a sequel.
“We are not signing it yet because we think that when we have fully completed our game, it will have an even better offer,” said the director.
Illustrating the money involved, the files showed that Microsoft paid $2.5 million for action game ARK: Survival Evolved on Game Pass and $2.3 million for its sequel ARK 2 – both from US developer Studio Wildcard. , owned by the Chinese Snail Games.
An executive at another developer, Recreate Games in Shanghai, said his company signed a deal with Microsoft last year for its upcoming multiplayer title Party Animals to be released exclusively on Xbox.
“Xbox has contacted many projects in China and these projects are mainly focused on developing console and PC games,” said Chief Executive Luo Zixiong.
Microsoft did not respond to email requests for comment.
PLAY CATCH UP
Microsoft was slower than Sony in China. The Japanese company launched the game accelerator program China Hero Project in 2017 to help Chinese developers publish games on their PlayStation. It has supported 17 titles, seven of which have hit the market.
“We’ve been quiet for the past two years. But the program is still buzzing,” Kuangyi Zhou, former manager of the China Hero Project, told Reuters in April. “We are proud of all the games that have successfully emerged from the program … There will be no doubt that another batch will come.”
In 2019, Sony partnered with miHoYo, a little-known studio that developed Genshin Impact. The game – a worldwide hit when it was released a year later – is available for PCs and handheld devices, but the console version is exclusive to PlayStation.
Microsoft regretted missing out on Genshin Impact, said two people familiar with the matter. It spoke to miHoYo early in the game’s development, but failed to reach a deal, one of them said. The other person said the experience is the driving force behind Microsoft’s more active pursuit of Chinese developers.
“Collecting Genshin Impact made Sony a lot of money,” said the second person, who declined to be identified because the information was not public.
There is no public data on console revenue from Genshin Impact, but data from Sensor Tower puts the figure at US$3 billion for mobile devices as of May.
MARKET EVOLUTION
For much of the 21st century, Chinese gamers mainly played imported titles, as homegrown games were considered worse in production value. Even Chinese gaming leader Tencent Holdings started publishing foreign games domestically.
As the market grew into the world’s largest, local studios invested more and more in developing better quality games. The trend accelerated with legal restrictions on new games and limits on the number of imports, and benefited from the return of engineers who had worked at top studios such as Ubisoft Entertainment SA and Activision Blizzard.
Gaming executives are now pointing to Genshin Impact as a global industry milestone, praising its production value and seamless cross-platform gameplay. Apple even used the game to showcase the power of its premium devices, including the new iPad Air equipped with the latest M1 processor chip.
Another milestone was Naraka: Bladepoint from 2021 from NetEase, China’s second largest games company. While most Chinese titles are free to play and take advantage of in-game sales, Naraka: Bladepoint sold over 10 million copies despite the $20 price tag, reflecting confidence in its production value.
The game caught the attention of both Microsoft and Sony, two sources told Reuters. One of them said NetEase gave priority to Microsoft, making the game exclusive to Game Pass in June.