1. China Prohibits Foreign Investment in Online Game Publishing
Goreign companies are not allowed to invest in online game publishing in China. Reiterated in the 2016 Administration Rules for Online Publishing Service (2016 OPS Rules), online games are considered online publications and offering such publications via information networks is providing online publishing services. According to the Catalog for the Guidance of Foreign Investment Industries (revised in 2017), online publishing services fall under the industries where foreign investment is prohibited. Foreign developers, therefore, are prohibited from selling or operating online games directly in China.
2. Licensing is Key
Due to the restrictions stated above, foreign game developers must partner with a Chinese entity to enter the Chinese gaming market, and licensing is the way to go.
In choosing a China licensing partner, you want to first find out whether your potential licensee is qualified to sell and operate online games in China. Ideally, this potential licensee should have an Online Culture Business Operation Permit (网络文化经营许可证) and an Internet Publishing Service Permit (互联网出版服务许可证). If the licensee does not have these permits, it will not be able to apply to import foreign online games.
You will also need a licensing agreement to protect your legal rights and economic benefits. What we have previously written on China licensing agreements holds true for gaming licenses as well and you should read the following:
- China Licensing Agreements: Giving Your Technology a New and Profitable Life
- China Difficulties, Netflix, and Why We Love Licensing
- China Licensing Agreements: The Extreme Basics.
Once a licensing agreement has been signed, the Chinese licensee will be in charge of registering your game with the Copyright Protection Center of China, applying for import approval, and the actual operation after the approvals. Since you as the foreign game developer will not be directly involved in these steps, it is critical you choose a Chinese partner capable of going through the complex approval process and operating your game smoothly.
3. Approval authorities and content review
Online games are subject to censorship and games submitted to the relevant Chinese governmental agencies for review must be fully developed and in their final operational version (or public beta version). The standard of content review is unclear. A few examples that may cause a failure to obtain approvals or require changes, include excessive violence, obscenity, compromising territorial integrity of the state (e.g. marking certain areas as independent countries), or discrediting the Chinese army. Again, an experienced Chinese game operator should be able to help the foreign developer avoid common pitfalls.
China’s online gaming industry is booming despite heavy regulations. Choosing your Chinese partner wisely, and carefully negotiating and crafting your licensing agreement are nearly all that you need to navigate through this battlefield.
