It is another light news week due to the COVID-19 (formerly known as the novel coronavirus) epidemic. This gives us time to dig further into the major trends set in 2019, and today we present Part Two of our Special Feature examining the key role of government regulation in the growth and direction of China's esports industry.
Again, if you live outside of China and are seeking a way to join the battle against COVID-19, please consider donating to this incredible gofund me campaign organized by Wuhan University Alumni in New York. Thank you!
THIS WEEK'S NEWS
COVID-19 Impact Update
Some businesses began to open on Monday the 10th, but all live esports events continue to be postponed or suspended indefinitely (see our last two issues for a list), and much certainty remains as to when and how tournaments will begin again, with some expected to be relocated. Dota 2 teams were able to compete in online qualifiers for the ESL One Dota 2 Major to be held in Los Angeles on March 20, but reportedly those that qualified are being blocked by a U.S. travel ban on foreign nationals who have recently been in China. It is too early to tell what the full financial impact will be on China's esports industry, and some clubs will be able to weather the storm better than others.
One bright spot is that online gaming has never been more popular, particularly mobile gaming. Niko Partners notes that PC gaming is likely to be hit hard by the closure of internet cafes, but will be offset by a surge in home PC gaming, with Steam usage setting a record over the Spring Festival. They also note that video game streaming platforms have also done very well, with Douyu reporting a doubling of users for top games as compared to the last Spring Festival.
I highly recommend this heartfelt article by Hongyu Chen at TEO, diving into the history and culture of esports in Wuhan and its contributions to the esports world. Some highlights:
Many internationally famous pro LOL players come from Wuhan or Hubei Province, including EDG veteran Ming "Clearlove" Kai, and household names Jian "Uzi" Zihao from RNG, and Yu "Jackylove" Wenbo from IG.
International esports legend and founder of eStarPro, Sun "XiaOt" Liwei, is from Wuhan. His King Pro League (KPL) team won the first Honor of Kings World Champion Cup in 2019, and last fall announced the first home venue for mobile esports would be built in Wuhan (see Vol 2.9)
Wuhan is also home to leading streaming platform Douyu, which owes its massive success to esports.
We hope and pray that the turning point has come for the people of Wuhan, and for some normalcy to return to this vitally important metropolis.
LINKS: TEO, TEO again, Niko Partners
Nova Esports | PCS
Hong Kong-based Nova Esports announced that it has officially become the tenth team in the PCS, the new League of Legend pro league for teams based in Taiwan, Hong Kong and Southeast Asia. This is Nova's first LOL team, being generally known more for its prowess in mobile games like honor of Kings, Clash Royale, and Peacekeeper Elite. The PCS' first games, however, have been postponed due to the impact of travel restrictions imposed to contain COVID-19.
LINKS: TEO, Niko Partners
CrossFire Closes in South Korea
Smilegate announced it would close its online FPS Crossfire in South Korea, while letting Tencent continue to publish the game in China. Meanwhile, Crossfire remains one of China's most popular online FPS games, and as noted in several past issues is getting its own professional league this year for both PC and mobile versions. ▶️It is an interesting countertrend to see an esport simultaneously grow while becoming limited to one major market.
LINKS: MMO Culture
Warcraft: Reforged
Abacus reports that Blizzard's Warcraft: Reforged has received a disappointing reception in China, an unpleasant surprise for licensee Netease which announced in November that it would commit $717K USD / ¥5M RMB to developing an esports tournament system for the remastered game in 2020. ▶️As noted in past issues, WoW enjoys a passionate fan base in China that Netease and Blizzard are eager to tap.
LINKS: Abacus, iFeng
SPECIAL FEATURE: GOVERNMENT REGULATION
2019 was a busy year for the Chinese esports industry, so as part of an occasional series we are sharing our analysis of trends that emerged in 2019 and tying them to 2020. Click here to read our first Special Feature in this series on the steep increase in premiere esports events held in China in 2019.
Today we present Part Two of a feature examining governmental encouragement of China's esports industry, a key factor differentiating China's esports market from every other major market, and particularly important to the growth of China's esports industry in 2019. If you missed it, start by reading Part One at our website.
Government Policy, Part 2 of 3: Local Regulation
In this space last week, we reviewed the significant amount of support and structure that the Chinese central government provided to the esports industry in 2019, roughly coinciding with resumption of video game licenses by the State Administration of Press and Publication (SAPP) [国家新闻出版署]. While there remain concerns about content, protecting minors from game addiction and ensuring a viable academic path for professional esports players and coaches (which we will review in a future issue), it is remarkable that once China had the appropriate administrative apparatus in place, it officially and publicly legitimized esports and targeted its development as important to national economic strategy. While esports struggles for acceptance as a legitimate sport in some countries, China realized on an official level that esports is part of the face it is presenting to the world. Recall that in 2018, RNG’s Jian “Uzi” Zihao became that face in Nike's worldwide advertising campaign centered around LeBron James.
Thus emboldened, a few municipal governments and districts began rolling out targeted incentives to boost the local esports industry in 2019, with Jing’an District in Shanghai at the forefront. As the central government intensified its support of the esports industry in mid-2019, more local governments announced promotional programs and subsidies. As put by China’s Ministry of Human Resources and Social Security (CMHRSS) [人力资源和社会保障部] in its landmark June 2019 report:
“National-level policy support is the foundation for the development and expansion of the esports industry. As the international influence of esports increases, supporting policies of local governments are also being strengthened.”
By late 2019, the rollout of esports policies by municipal and district governments became at times a weekly occurrence, feeding a competition between major cities for industry investment and development. Cities often cited the potential for esports to enhance other local industries such as tourism and fashion, and thus increase their international profile. Tencent supported this theory in its Esports City Development Plan 2.0 [电竞运动城市发展计划2.0版本], calling for cities to more "systematically" develop the esports industry for mutual benefit, and to promote China's youth culture to the world (see Vol 2.5).
The Big Esports Cities
Shanghai is considered the biggest esports hub in China, a reputation built over a decade and owed largely to the preponderance of local media and software companies. Following Shanghai, there seems to be a competition between cities seeking to become the next esports hub, which before 2019 arguably would have only included Chongqing, Xi’an and Hangzhou, each of which had issued municipal policies supporting local esports industry before 2019. Guangzhou, Hainan, Chengdu, Wuhan, and even Beijing entered the fray in 2019, joining other esports-friendly cities in issuing policies to 1) provide economic incentives for esports business development, and 2) develop complementary pieces of the esports industry ecosystem, such as athlete registration procedures and training centers. In Shanghai, the same phenomenon was carried out on a district level, with multiple major districts competing to become Shanghai’s leading esports district.
Shanghai
Shanghai entered 2019 with a formidable head start against other cities in China, as the largest hub for clubs and premier competitions, claiming to hold 80% of all esports enterprises, clubs, and teams, and hosting over half of the significant esports events in China each year. Shanghai’s municipal government was an early believer in esports, making it part of official economic development strategy in December 2017 as part of the city’s 13th 5-year plan to accelerate development of the city’s cultural and creative industries. It boldly declared Shanghai would become the “global esports capital” through investment and construction of international caliber e-sports venues and developing clubs, brands, competitions, training, and live broadcasts, coming together to form a comprehensive esports ecosystem.
Shanghai followed its 2017 plan with two significant regulatory reforms aimed at the local esports industry. First, it wrapped up 2018 by releasing the first esports player registration procedures in China, and officially registered the first batch of 85 professional esports athletes in August 2019 in a public ceremony, giving them access to athletes’ city benefits and allowing them to represent Shanghai in international tournaments. Second, it promulgated new equipment and facilities standards for esports venues, and created a classification system to rank venue size and operational capability from class A (largest, for international events) to D (smallest, for local events), incentivizing venues to upgrade in order to compete for the most lucrative events (see Vol 2.5, ChinaJoy 2019), and spurring new construction such as Netease’s planned $710M USD / ¥5B RMB class A esports venue in Qingpu District. Shanghai’s policy moves unleased a frenzy between districts to dole out subsidies and compete for esports development and investment activity in 2019, including:
Jing’An District
In January, announced a raft of incentives aimed at cementing its status as the top district for esports, including:
Individual subsidies to esports organizations for rent (up to ¥1M RMB), renovations (up to ¥500,000 RMB), and training costs (up to ¥500,000 RMB)
Individual subsidies for development projects such as original games, streaming platforms, operations platforms, etc., up to ¥10M RMB for major projects
Individual subsidies up to ¥500,000 RMB for software development Individual subsidies up to ¥5M RMB / 30% of cost for construction and renovation of esports venues, or up to ¥10M RMB / 50% of cost if hosting at least 100 significant esports competitions per year
Individual subsidies for international competitions up to ¥1M RMB if the prize pool exceeds ¥500,000 RMB, up to ¥1M RMB if the prize pool exceeds ¥3M RMB, and up to ¥3M RMB if the prize pool exceeds $1M USD or its equivalent (approximately ¥7M RMB)
Individual subsidies for other types of major esports events, such as award ceremonies, exhibitions, and forums, up to ¥500,000 RMB / 50% of cost Individual incentives up to ¥2M RMB for esports enterprises that successfully list on a major stock exchange
These generous subsidies effectively set the pace in Shanghai, and were cited by veteran esports organization Lao Pao (老炮儿) in its decision to relocate its headquarters from Beijing to the Jing An District, and also presumably played a factor in Jing’an District hosting the inaugural "Esports Shanghai Masters" [电竞上海大师赛] with Bilibili in November (see Vol 2.10).
Yangpu District
In July, announced subsidies as part of 23 new policies to attract esports investment (see Vol 2.1)
Pudong District
In July, announced $710M USD / ¥5B RMB in funding to support gaming and esports development, including subsidies of up to ¥10M RMB for new esports venues, up to ¥5M RMB for publicly listed esports companies, up to ¥3M RMB for international tournament organizers, and up to ¥2M RMB as incentives for top performing esports teams (see Vol 2.5)
Five months later, plans to build a new esports industrial park in Pudong at the Sunland Mall [森兰商都] were announced by the Waigaoqiao Group (see Vol 2.18), and the Jucheng Group announced it was establishing the first "National Esports Talent Training Base" [电子竞技人才实训基地] in Pudong New Area (see Vol 2.19).
Huangpu District
In August, partnered with VSPN to build the Shanghai Esports Hall [上海电竞·城市会客厅] at the popular Xintiandi mall (Vol 2.7)
Minhang District
In October, Minhang district required that, as part of Edward Gaming’s parent company purchase of ¥1.25B RMB of commercial land, that the portion dedicated to esports venues and operations would host at least 100 domestic and international esports events per year.
Xuhui District
In October, hosted a major esports forum in which it publicized development subsidies related to development of the Xuhui Binjiang area (徐汇滨江地区), and signaled its interest in esports as a business that combines technology and entertainment as a youth lifestyle (see Vol 2.15).
Putao District
In December, rolled out esports investment incentives, including individual subsidies of up to ¥5M RMB for construction of esports venues and esports "platforms", up to ¥3M RMB for "leading enterprises", up to ¥3M RMB for competitions, up to ¥1M RMB for esports talent brokerages, and up to ¥500K RMB for club operations (see Vol 2.17)
NEXT: Next Week we will look at municipal policy toward esports in Beijing, Chengdu, Guangzhou, Wuhan, Xi’an and Hainan, visit some smaller “esports towns”, and consider the future implications of locally focused economic incentives in the wake of the COVID-19 epidemic.
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