China’s smaller cities spend the most on video games nationally: Report

People visit the stand of Tencent’s mobile game ‘Glory of Kings’ during the 2020 China Digital Entertainment Expo & Conference (ChinaJoy) at Shanghai New International Expo Center on July 31, 2020 in Shanghai, China.Zhou You | VCG via Getty ImagesSINGAPORE — Video games are booming in China’s smaller cities, with citizens there accounting for more than half of revenue nationally, according to a recent report by Niko Partners.”76% of gamers in China live in Tier 3-5 cities, accounting for 70% of game revenue,” Niko Partners said in a synopsis of its China Gamers Report.Cities in China are classified by tiers based loosely on population and economic size. For example, places such as capital Beijing and Shenzhen are generally considered tier-one cities, while lower-tier cities are smaller.The country is the world’s top game market and will generate an estimated $40.85 billion in revenue this year, according to Newzoo.”What we think is happening with the smaller tiers is … there are more and more gamers adapting to uses of mobile devices,” Lisa Cosmas Hanson, founder and president of Niko Partners, told CNBC in a follow-up interview.With “fewer things to do for entertainment” in smaller cities as compared with their cosmopolitan peers in Beijing and Shanghai, “gamers spend their time with little cost entertainment which can be social.”This could also be attributable to improved mobile data and broadband infrastructure, Hanson added, with “lots of Android smartphones available at lower price points.”In a country of 1.4 billion people, even China’s smallest “cities” can have a population of more than 1 million each.For video game publishers looking at China, the analyst said: “If you really want to draw the attention of people throughout the country, Tier 4, Tier 5, these places can’t be ignored.”Different gaming habitsThe spending habits of those in China’s lower-tier cities differ from that of their peers in larger cities, Hanson said.For example, she said many gamers in the China’s smaller cities tend to “keep the ads on” in their games because they don’t mind it as much. They also tend to spend less money on in-app purchases, though the aggregate spending level remains quite high as “there’re so many people” in the cities.Citing a study examining the differences between gamers in Tier 1 and 4 cities, Hanson said those in the smaller cities were “convinced” that free-to-play games — which tend to make money through advertisements or in-app purchases — were cheaper as compared with their premium counterparts where a higher price is charged upfront.”They feel like they’re getting a better deal because they feel like they’re in control of the spending, but actually they wind up spending just as much or more,” Hanson said.Gaming as a ‘shared interest’ in ChinaBeyond peers in their own industry, video games often also compete for time against other entertainment options such as video streaming. Netflix once said it’s more worried about Fortnite than direct competitors like Disney+.Asked about the potential sources of external competition for gamer attention in China, Hanson said:  “It’s a shared interest among almost all the internet users in China.””There aren’t 720 million people spending a whole lot of money on most other types of entertainment,” she said. “It’s like the one thing that everybody does more than anything else.”— CNBC’s Evelyn Cheng contributed to this report.

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