Social Network Games At Risk In China

Planned regulations from the Chinese government would impose a $1.47 million fee for social network sites to register games.
The Chinese government is planning regulations that could spell the end for most small game developers that produce content for social networking sites (SNS). The regulations would create cost barriers that would make business virtually impossible for most developers.

The immense popularity of SNS games caught the attention of China's General Administration of Press and Publication (GAAP) and Ministry of Culture. More than 92 million people in the country were users of SNS games as of April, according to a recent report issued by the China Internet Network Information Center.

Both GAAP and the Ministry of Culture claim that the fast development of SNS games has fostered problems, including games riddled with pornographic images and violence. At the end of last year the two agencies said they would begin monitoring work, and they previously stated that a timetable for new regulations would be released in June.

The Ministry of Culture has revealed some details of planned regulations to game developers. The usual demands are made, such as requiring that SNS games prove that they did not infringe on intellectual property rights and that they receive approval from the Ministry of Culture and a publishing license from the GAPP.

But it is the next rule that has game developers sweating and could prove to be their demise -- to register a game, SNS sites will purportedly have to cough up a $1.47 million fee.

"This will further raise entry barriers for SNS operators. Looking at the present situation, not many SNS operators or third-party application developers have this kind of capital. This regulation could mean that a majority of developers retreat," said Zhou Kai, deputy general manager at Youbei Technology, a game developer.

Developers have trouble getting by as it is. A number of sites are not transparent about their finances and fail to cut developers a fair share of revenue. Also SNS users are accustomed to playing games for free, which limits the profit-making opportunities.

Developers hope regulators offer different standards for large and small games. They say that $1.47 million is an impossible figure for most to reach. "More than 80% of domestic SNS games only have monthly revenue in the (hundreds of dollars), plus SNS platforms take away a large portion of that money," Zhou said.

If the government proves inflexible, many of the producers will be forced to give up their business or try their hand in overseas markets. Some are already in talks with international game developers and sites, but those that have tried say competition is fierce. "We're stuck between two difficult markets trying to survive," Zhou said.