This is issue #14 of the Magpie Digest newsletter, originally sent on 6/22/2018
Last week, the Chinese gaming community was shaken by an announcement made an ocean away. At Valve Corporation’s press conference in Los Angeles during the Electronics Entertainment Expo, the company declared that it would be partnering with Beijing software company 完美世界 (“Perfect World”) to finally, officially bring Steam, the world’s largest distribution and community platform for PC games, to China.
China’s gamers are, on the whole, very unhappy about this news. To them, it marks Steam’s exit from — not entrance to — the Chinese market, a carefully orchestrated move by a government savvily balancing its fear of uncontrolled media with the fear of a widespread, gamer-led rebellion.
Bilibili bullet comments on a CCTV news clip announcing Steam’s entry into China, unofficially uploaded by a user. Other than the poop emoji, the prevailing sentiments in the rest of the comments are 完了 (“it’s all over”) and 凉了 (literally “cooled down,” used here to mean “it’s all over”).
Chinese Government Wary of Games
Though China is proud of being home to the world’s largest games company (Tencent, perhaps better known as the creator of WeChat), the Chinese government has always maintained a wary stance towards gaming. In 2000, seven government agencies came together to ban the manufacture and sale of all game consoles in an effort to prevent young people from becoming addicted to games; the ban stayed in place until 2015. When this ban simply caused the market for pirated PC games to flourish instead, the government began to regulate and surveil the internet cafes where young people often gathered to game together. They even passed regulations in 2007 — recently updated for mobile — that require games companies to develop “anti-addiction” measures for any games that prove too popular.
The government’s attitude towards games draws from an unlikely analog: its concerns around drug addiction epidemics. China’s ruling class is still haunted by the lesson of the Opium Wars of nearly 200 years ago: beware anything that the citizenry might get hooked on and distracted by, especially when it’s peddled by foreigners.
Despite these constraints, however, both China’s appetite for games and its domestic games industry have grown steadily. In 2017, analysts estimate that more than 600 million Chinese people played games, and over half of them played on PC.
Steam Flourishes Amidst Uncertainty
Steam first took off in China in 2012, after Valve and Perfect World teamed up for the first time to officially bring games like DOTA 2 and Counter-Strike: Global Offensive to a Mainland audience that had grown up playing these games’ prequels in net cafes and college campuses throughout the 2000s.
For most of its lifespan in China, Steam has managed to operate in a gray area with regard to the authorities. With no official presence in China, the thousands of games on Steam were not officially approved by any government agency. And yet, the platform had also not been outright banned, meaning that players could circumvent basic obstacles to purchase games (often at a steep regional discount) using Alipay, foreign credit cards, or even gift cards resold on Taobao.
A modified viral image of Valve’s president Gabe Newell (who is universally referred to on the Chinese internet as G胖, or “G Fatty”) taken from the European internet with the added text: “I heard you guys have something called ‘WeChat Wallet.’”
From this precarious position, Steam grew steadily with two major spikes in popularity: once in 2015, after the platform introduced RMB support and the ability to search for games in Simplified Chinese, and again in 2017, when Player Unknown: Battlegrounds almost singlehandedly increased the number of Chinese Steam users by 26% in a single month. Today, China is home to over a quarter of all Steam users, more than any country other besides the US.
For the government, this began to smell like trouble. While Steam is primarily a software distribution platform (and was initially ignored as such by the censors), it also developed community features, including user-organized groups and social forums tied to each game. Moreover, Steam effectively became a user-generated platform in June 2017 — under Steam Direct, anyone who could make a game and pay a (high) fee could distribute their game on the platform.
Sure enough, a Chinese game designer almost immediately took advantage of this to launch a game called “The Wall” which was a thinly veiled critique of online censorship in China. With such a direct provocation, the censors could no longer turn a blind eye. By the end of the year, Steam’s community pages were suddenly inaccessible in China — though to the widespread surprise of gamers, the rest of Steam remained operational.
Keeping Your Enemies Close
As one shrewd industry commentator on WeChat put it, Steam had become the foreign platform with the largest Chinese user-base to be operating freely in China. Nevertheless, regulatory agencies realized that an outright ban would likely create a far worse situation.
From WeChat blogger 对对对你们都是业内 (“Yeah yeah yeah you’re all industry insiders”): Neihan Duanzi (a popular Chinese humor site run by new tech giant Bytedance) also had several thousand Chinese users and it was shut down in a snap, so why couldn’t Steam be, too?
Because behind Neihan Duanzi was a Chinese company, so shutting it down mean that both the app and the community were totally gone. When the tree falls, the monkeys scatter. But Steam can’t be destroyed like that because it has foreign roots. If it were suddenly blocked, hundreds of thousands or maybe even millions of users would jump the Great Firewall to use it out of habit.
This would create a difficult to predict or maybe even catastrophic situation. A blocked Steam would result in many very angry gamers. On the other side of the Great Firewall, they might well express their disapproval on Steam’s community pages through posts, games, pictures, short videos, and memes. Gathering rapidly, they would call into question and criticize the censors’ decisions and amplify each other’s anger to become a powerful current that would echo back into the country and make waves abroad.
No wonder the relevant agencies have to take a more measured approach.
The Chinese gaming community’s extremely negative reaction to the news of Steam’s official release in China, however, is an indication that the government has managed to find a workaround — a newly evolved tactic to deal with this delicate situation. Instead of banning Steam outright, it has likely coordinated this arranged marriage of sorts between the foreign Valve and Perfect World, a domestic liaison (based in Beijing, no less) that the Chinese government has much more leverage over.
Chinese gamers understand this as a victory for the government, and are already lamenting what is likely to come next: the creation of a Chinese version of Steam with carefully (but opaquely) approved games, which will then justify the blockading of the unfettered international marketplace. But many internet commenters are already laying out a workable plan of action: study hard, get into a good American grad program, and play all the Grand Theft Auto 6 their hearts desire.
- 对对对你们都是业内: Steam Must Enter China (Chinese, referenced above but really worth a read in full)
- Abacus: Steam China Faces Doubts Over Censorship (English)
- Gamasutra: How premium PC games continue to rise, surprise in China (English)
- Zhihu: What do you think of Steam and Perfect World’s collaboration to release a Chinese version of Steam? (Chinese)
- Bloomberg: China Cracks Down on Video Games (English)
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Magpie Digest is a project of Magpie Kingdom, a consultancy that provides analysis, business advisory services, and custom research to help businesses translate their value for the Chinese market. The Magpie team (Christina Xu, Tricia Wang, and Pheona Chen) is based in New York and Shanghai.
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