Apple just banned 39,000 games in China in a massive purge. Here’s how mobile game developers can meet this challenge

What's going on?

If you cast your mind back to the pre-Covid-19 era, (did such a time ever even exist?) China introduced a new law in 2016. This required all paid games or games with in-app purchases to register with a governmental regulatory body in order to remain present within the marketplace. The law, which was loosely enforced to begin with, compelled mobile games developers to apply for an ISBN number from the alarmingly titled National Press and Publication Administration. Whilst Android games developers complied pretty quickly with these new regulations, loopholes allowed iOS developers to avoid them.

So what have Apple done about it?

However, Apple began more aggressively seeking compliance with Chinese regulation in 2020 and gave an initial July the 31st deadline for devs to comply with Chinese law. This was then pushed to December the 31st. Despite these deadlines and warnings, thousands of developers got caught up in the purge. Even hugely popular mobile games like Assassin’s Creed Identity and NBA 2K20 got the axe. If this has affected giants like Ubisoft and 2KGames, then clearly the warnings from Apple were not loud enough. Either that, or games developers did not take the warnings seriously – a scenario that seems less likely.

Why have Apple done this?

Apple have given no official reason for their sudden enthusiasm for regulatory compliance with Chinese authorities. Though, given the antagonistic relationship between China and the US – and in particular, the US position on Chinese tech firm Huawei – it would not be ridiculous to assume that Apple would fear some form of tit-for-tat retaliation from the Chinese government. Apple, in some ways, has become a modern American icon. The USSR prohibited McDonalds until the 1990s. Apple could well find themselves in a similar position with China unless they are careful to avoid provoking them.

USA China Flags Image

Regardless as to whether your views on the Chinese government are positive or negative, the country is one of the world’s largest markets. It is particularly important to Apple, as the nation represents 17% of its global revenue. Chinese iPhone users even outnumber those in Apple’s home nation of the US. A complete ban of iPhones and Apple tech in China may seem slightly far-fetched and would no doubt be deeply unpopular with Chinese users of the tech company. But Apple executives will surely have considered this possibility, and will surely have paled at the idea of it becoming a reality. As Covid-19 has shown, companies that plan for a rainy day tend to do better if the rain arrives than those who haven’t even considered getting an umbrella.

How does this make a difference to mobile game developers?

While many mobile games feature on both Apple and Android stores, for the 39,000-odd mobile games and developers that have just been cut, they’ve just lost access to a chunk of their potential users in China. As the Chinese are some of  one of the more enthusiastic users of mobile games worldwide, this is very bad. In Global Web Index’s 2020 World of Gaming Report (free to download here), they discovered that only 18% of gamers had paid for a game in the last month, while 50% of gamers had downloaded a free-to-play game. Free-to-play games dominate the mobile game market, but microtransactions represent a significant amount of income.

 

Obviously, fewer users for any pay model means less revenue, less revenue means less profit, less funds to reinvest in game development, and ultimately – possibly – redundancies. Mobile game developers need to act quickly to replace their revenue stream and the stakes are high.

 

It’s worth noting that this purge only applies to paid games and freemium games with paid features. Games deriving their revenue from advertisement are seemingly not affected. I’ll address how this might not necessarily be the case later though.

With Covid-19 ongoing as well, this must come at the worst time for the mobile games industry, right?

WePC’s stats suggest that the games industry has reacted quite well to Covid-19, at least on the face of it. News of a vaccine will hopefully lead us forward out of the pandemic. It will be interesting to see whether analysts maintain this positive outlook. People are at home more, and this leads to less “dead time” – namely sitting on public transport, queuing to get on public transport, or travelling to get to public transport (you get the idea). You would assume people are most receptive to playing mobile games during this time, but as the above stat suggests, the reduction hasn’t reduced revenues, which in some ways seems counter-intuitive.

Waiting on a train image

Are people just slacking off at home then to play games?

It would be tempting just to assume that all workers, liberated of the shackles of in-person managers, are now slacking off and playing mobile games when they should be updating a spreadsheet or writing an article about Apple pulling games doing other work. Some companies have introduced increasingly Orwellian measures to monitor their workforces though, which somewhat scuppers this idea. Even for workers of companies that don’t spy on their employees, there are other explanations for the increased value of the mobile games industry despite the reduction in time we would traditionally label as prime “gaming time”.

Like the PS5 and Xbox Launches?

Firstly, last year was a new console generation year. Demand for the PS5 and Xbox Series X is through the roof, and this could have had a knock-on effect on how keen people are to play games in general. In a sense, mobile game developers could well be benefitting indirectly from enthusiasm toward more “traditional” consoles and games platforms. 

Games controller image

Could it be that people are looking for something to do?

It’s worth bearing in mind that while people have less “dead” time, they’ve also been prohibited in many countries from their usual hobbies. Coupled with the lack of travel time to these activities, this has meant that many people have surely been looking for something to do in these newly free slots in their week. There’s only so many sourdoughs you can make and parks you can walk in.

Finally, just from personal experience, mobile games are a great at book-ending tasks. Whilst I no longer really travel anywhere in any meaningful sense, I find I do punctuate tasks and things I’m doing with “phone-time”. The kind of procrastination time that finds you trawling through Youtube videos or venturing down a Wikipedia rabbit hole researching how many US Presidents have been called James (amazingly six, so around thirteen percent), is also the kind of time that people devote to mobile games that are so accessible and easy to pick up.

Is it all about time then?

All of this means people have been richer in the most valuable of all commodities: time. We spend on average 3 hours and fifteen minutes on our phones each day, and the average person sleeps for 7 hours a night. This means that we spend 17% of our the time we are awake on our phones. So we are on the right platform to play mobile games for about a fifth of our time. Obviously, there are other factors and reasons as to why gaming has boomed so much over the last year, but the time factor is at least one answer. 

Time image

So mobile game developers don’t need to worry about China then?

Answering a question with a question is not really the done thing, but an important one would be: as we go back to some elements of our former routines, that for many involved less free time in which to play mobile games, will our game consumption reduce accordingly?

 

The picture outside of China for mobile game developers actually looks pretty reasonable in many ways. But it is not completely ridiculous that predictions of growth for the industry, particularly in emerging markets like Latin America and Asia, could turn out to be overly optimistic at a time when some companies are already feeling the effects of losing access to their biggest market. In short, very few markets are completely impregnable. Whilst there are currently no visible negative effects of the pandemic on the mobile games industry, this may not necessarily stay that way.

 

To put it bluntly, while there are game companies out there who will shrug off Apple’s China ban, comforted in the knowledge of increased sales and revenue in Western markets, there will also be many who will be hurting when the world is in the midst of an extremely volatile time period. As 2020 has proven, the winds can change quickly and without warning.

Ok, so why don't games developers just switch to an ad-based revenue model?

Well, they can. Ad spend was predicted to rise to $64 billion dollars in 2020. Paid games only account for a small share of the market, with a much larger chunk taken by free games with an ad-based revenue model and freemium games with paid features. However, like most things, suddenly switching your revenue stream is not as simple as it first seems.

 

Our old friend time is one problemWhilst it wouldn’t necessarily take that long to install an SDK and remove all paid features, paid content is the essence of what some games are all about. Great paid features are often the things that users find most interesting, so for some games this would require a complete rethink of how the game works. Simply switching to an ad-based model won’t really solve that for some games. During this restructure, developers aren’t earning any revenue in one of the world’s biggest mobile game markets. Something like this is presumably not going to be as much of an issue for the behemoths of the industry, but for more modestly sized mobile game devs even a small drop in revenue for a small period of time could be calamitous.

Does this link to engagement and retention rates?

PLaying mobile games image

The time factor also has a direct impact on engagement and retention rates. Like most things, playing games becomes habit. Whilst gaming-app retention rates are horrendously low, even the 6.5% retention after day 28 that games average is going to take a battering if the app is suddenly down for ages. While developers are trying to work out how to change it to an ad-based revenue model – something which in itself would be a difficult proposition for a game with high-end content and fewer users – users will go elsewhere. 

With such low figures, game developers are completely reliant on a continuing churn of transient users and a small core following who stay with them. But how many of those users in China will come back once the game is restored with its new features? With such a massive amount of competition, it’s all too easy for players to move on to other games. And then, of course, a game developer has to sell the advertising space. While third party ad networks do this for you, they naturally take a big cut for doing the leg work.

What about players?

We then run into the issue of how this effects players. If a player has just paid for a feature in a game and then finds that feature unavailable, or available to everyone for free, they are not going to be particularly happy. Refunds and complaints are never great but become even more problematic when you’ve just been forced out of a market.

 

People also hate ads. It’s just a fact of life. (Though, it’s worth pointing out that 76% of US mobile gamers prefer opt-in ads, where there is usually some form of in-game reward in exchange.  This is important and we’ll come back to it later). One of the advantages of a freemium or paid game is that it proves customers are willing to invest in the game because they care about it. They care about it enough to pay to remove the ads, or to receive that awesome new weapon or character that they can tell their friends about. With the Apple ban, mobile game developers are being forced into preventing users from doing this. They are removing their customer’s option to care more about the game.

 

In short, whilst moving over to an ad-based model may well solve the issue of a forbidden market for mobile game devs in the long term, it potentially does not solve all problems in the short to mid-term. In essence, there’s only one way to completely absorb the costs of a lost market like China: increase your revenue stream in other markets.

How Pointvoucher is a solution

Pointvoucher logo

Pointvoucher works by incentivising players with real-life rewards. These can range from vouchers to discount codes and big prize draws with some huge brands. When users play games on Pointvoucher, they earn points. They can then redeem these points for rewards from big brands. This incentivizes them to spend more time playing a particular mobile game in order to earn points, which ups the engagement rate for developers. 

 

 I mentioned in the last section that 76% of US mobile gamers are willing to watch ads if they are rewarded for it. Pointvoucher offers real-life rewards for users. This is worth re-iterating. At a minimum, we therefore know that players in the US are at least 76% more willing to watch ads if they have signed up for Pointvoucher. We know that because the 76% figure only applies to in-game rewards, not real-life rewards. 76%  just gives us a starting point. Pointvoucher builds upon a game developer’s existing in-game reward system with additional offerings for the consumer. And it does this without effected existing in-game rewards in any way. 

Pointvoucher Logo

That's all very well, but it sounds like it's expensive and a big hassle.

It is completely free for mobile game developers to download the Pointvoucher SDK, there’s no need to rebalance, and there’s no interference with their in-game currency so they maintain their existing revenue stream. Pointvoucher also offers a 50% share of the net revenue generated by any players who sign up to the platform through the game developers. Any current ad-based revenue is only added to, not reduced. It also offers to promote games to the company’s existing 500,000 members.

 

What all of this does is allow developers to tap-in to the popularity of really successful brands like Nike or Whole Foods. People love to shop at these places, and if mobile game developers register with Pointvoucher then it means they can tap into a little bit of these brands’ success.

Essentially, Pointvoucher creates a more symbiotic relationship between brand, game developer, and consumer. Each receives rewards for their involvement. Game developers gain more players who play for longer, which in turn means greater revenue. Brands get to promote their offers to more people. Consumers get rewarded for doing something they enjoy: playing games. It’s a win-win-win for everyone.

Conclusion

The loss of revenue from the Chinese market is potentially damaging for developers. But the existence of platforms like Pointvoucher allows them to make up for at least some of that loss. Hopefully, positive predictions for the industry will be bear fruit. In the meantime, as with any hyper-competitive industry, everyone is always looking for an edge, and the onus is always on participants within that industry to find it.

 

Have you been affected by Apple’s China purge, either as a player or a mobile game developer?

Let us know in the comments below! 

 

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