For more than two decades, China’s government has tried to reign in the influence of gaming on its people – even while some of its leading companies in the sector such as NetEase, Hero Entertainment, and its top gaming juggernaut, Tencent, have thrived domestically and expanded globally. The Chinese Communist Government’s “love-hate relationship” with the gaming industry began at the turn of the century with its first ban on gaming consoles such as Sony PlayStation went into effect in 2000 due to the belief that gaming had a negative influence on children. China lifted that ban on consoles 15 years later.
Fast-forward to September this year, and another controversial move to limit Chinese children’s time spent on gaming went into effect – but this time for online gaming, which has boomed during the pandemic. The new rules say those under 18 years old can only play online games for three hours a week, between 8 p.m. and 9 p.m., only on Fridays, Saturdays, and Sundays, and additionally on public holidays. Some industry-watchers, including Fortune’s Grady McGregor, have questioned China about its new policy given the fact that “China’s gaming market was built on free and addictive games.”
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China seems to enjoy promoting its technology prowess, including its booming gaming industry that raked in more than $44 billion last year, making it the world’s largest – beating out the U.S., which is #2. Yet, even with its leading position and nearly half of its own citizens playing video games last year, per the China Audio-Video and Digital Publishing Association, an article in state media that called video games “spiritual opium” saw an investor sell-off of nearly US$100 billion wiped off the value of gaming stocks leading up to the regulation limiting children’s gaming screen time on September 1, per reporting in the South China Morning Post in late August.
Beijing’s recent move to villainize gaming as a social addiction is in line with its recent crackdown against Big Tech, including its public position against the IPO of Ant Group, Alibaba’s fintech affiliate, last year. China’s regulatory focus has seen public shares of NetEase and Tencent dropping to almost half of their highest pricing in early 2o21.
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Ironically, while President Xi Jinping is exerting more social control over its citizens at home, China continues to invest heavily in Latin America. And, while gaming time is limited for gamers under 18 years old in China, Latin America’s gaming market continues to grow. As of this summer, Latin America’s mobile-gaming market was valued at $3.5 billion, per a joint report from Google and Newzoo published in late July. And that’s expected to grow quickly with the introduction of 5G and internet penetration rising across the continent.
LatAm’s mobile gaming market has thrived since 2019
Today Brazil is one of the main world markets for the games industry because it has a high volume of players and about 72% of Brazilians say they play digital games, according to GoGamers – a business unit of Pesquisa Game Brasil that surveys the sector. This percentage is close to other LatAm countries, but it is important to highlight the volume of the gaming population, mainly leveraged by smartphones.
“Currently, smartphone games are the platform of choice in Brazil for 41% of our respondents in our last survey,” said Carlos Silva, Head of Gaming at GoGamers. “We have games like Free Fire, which is a phenomenon. In addition to the game being free to play and running on different types of devices, from the simplest to the most modern, Free Fire has built a very robust ecosystem for its community. Today, in addition to being a casual game, Free Fire is a game for the hardcore gamer, as it presents a competitive scenario and, therefore, creates good expectations for these players.”
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Free Fire is a battle royale game that became the most downloaded game globally in 2019. Designed by 111 Dots Studio and published by Garena for Android and iOS, the game also received the “Best Popular Vote Game” by the Google Play Store in 2019. Garena, which declined to be interviewed for this story, is the gaming division owned by internet giant Sea Limited (NYSE:SE), which has emerged as the e-commerce leader in Southeast Asia while expanding into new markets such as Europe, India and Latin America.
Afterverse, another mobile-gaming sector leader based in Latin America that was spun off from Movile’s PlayKids last December, credits the fast growth of its breakout gaming title PK XD to its business model that’s focused on being free to play and designed for everyone to play in a safe environment. This ease of accessing the game at no cost and Afterverse’s partnership with more than 350 global content creators, from nano-influencers to mega-influencers who interact and share content tied to the game with their fans on popular social-media platforms, have led to the rapid growth to more than 50 million active monthly PK XD players around the planet as of the game’s recent two-year anniversary.
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A different perspective on gaming’s social benefits
Counter to China’s current stance that online gaming is addictive and detrimental to its children’s development, Afterverse sees things differently.
“Our main goal with PK XD is offering an interactive experience for those who play the game, in which they can build friendships and interact in a safe place,” said Felipe Hayashida, COO of Afterverse.
Recent research supports the rarity of China’s claim that gaming is addictive. Last May, Brigham Young University published a six-year study, the longest study ever done on the topic of video-game addiction, that found 90% of gamers do not play in a way that is harmful or causes negative long-term consequences. Only about 10% of gamers fell into the pathological video gameplay category. Those individuals displayed higher levels of depression, aggression, shyness, problematic smartphone use and anxiety by emerging adulthood.
Based on research insights from Pesquisa Game Brazil’s panel dedicated to parents and children that analyzes the behavior of younger players through the parent’s answers, there are several caveats and cautions, but there are many benefits related to socialization and the development of logic and reasoning.
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“Balance is an important factor based on our interviews with gamers’ parents, but the interesting part is that the parents’ perception is already more participative. This year we had a total of 85% of parents claiming that their children play digital games and 84.1% said that they play it with their kids,” said GoGamers’ Silva. “At this point, we see that digital games are part of the family environment when we talk about entertainment and, with that, parents begin to have a better understanding about the benefits and care of their children.”
Only time will tell, but for now, online gaming continues to grow fast outside China, and Latin America continues to be a hot market for Asian gaming and streaming entertainment giants to invest in.