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Media & Entertainment

China's 500m gamers drive growth at Tencent and other IT giants

Esports market grows by leaps and bounds, but faces regulatory risks

Video games' popularity has given rise to thousands of teams of professional gamers in China.

SHANGHAI -- One year ago, Zen Guohao traveled some 1,000 km to Shanghai from his home in Hubei Province in central China in pursuit of a dream: playing video games.

Zen, who was 18 at the time, moved into a two-story, mortar-coated building about 15 km from the city center. He became one of dozens of pro gamers living in the building -- a gaming house operated by Chinese video-streaming startup Bilibili.

He specializes in League of Legends, one of the world's biggest online games. It is made by Riot Games, a division of Chinese internet conglomerate Tencent Holdings, and played by tens of millions of people around the world.

His father, who once vehemently opposed his decision to become a pro gamer, has come around. "Now, all he says is, 'You've gained weight. Pay more attention to what you eat,'" Zen said with a smile.

China now boasts a gaming population of over 500 million, and competitive gaming has become big business. Esports-related sales in China hit 51.3 billion yuan ($7.3 billion) during the first six months of 2019 and are on track to top 100 billion yuan for the year, according to Gamma Data, a Chinese research company specializing in video games, movies and TV programs.

There are more than 5,000 gaming teams operating in an industry that now employs 440,000 people.

That means competition is intense. Zen and the roughly 60 other gamers in the Bilibili house practice for hours every day. They are divided into three groups: the first team, the second team and trainees.

Depending on their contracts, trainees are paid about 10,000 yuan per month, while mid- to upper-ranking gamers earn around $50,000 annually, according to Li Xinyuan, the team manager.

Top-tier gamers can earn over $90,000.

Those rates mean even trainees make more than average factory workers in Shanghai, whose initial monthly take-home pay is typically around 4,000-5,000 yuan per month.

The Bilibili gaming house in Shanghai.

Video gaming was officially recognized as a sport by the Chinese government in 2003. When gaming was deemed a profession by the Ministry of Education in 2016, Chinese gamers began to hit the road to play for money.

Pro-circuit video gaming is the driving force of the rapid growth of the game market, which the government views as a potential breeding ground for more IT giants like Tencent, the powerhouse behind League of Legends.

The company is a financial behemoth with a market capitalization of $411 billion. Its gaming business is the company's main cash cow, racking up $18 billion in annual sales, about 40% of its total revenue.

As video gaming has evolved from an eight-bit hobby to a multibillion-dollar industry, it now receives steady streams of investment from businesses.

Many companies sponsor teams, like Bilibili. They often have players live together to build chemistry with teammates.

Top Sports, another sponsor, operates more than 8,000 sporting goods shops across China, selling products from global brands like Nike and Adidas. It plans to spend $18 million in the next five years to develop its own gaming team, and it has set up a gaming house in eastern Shanghai.

"We aim to develop a team of 100 or so pro gamers," says Guo Hao, the manager.

Gamers at the Bilibili house receive two free catered meals per day.

In the Bilibili house, Zen undergoes a grueling regimen. There are two team training sessions, which last from 2 p.m. to evening and from 7 to 10 p.m. The gamers then continue to practice and compete until late into the night.

Zen entered the world of professional gaming four years ago at the age of 15, after giving up on his ambition to become a pro table tennis player. He had played table tennis since age 6 at the urging of his father.

An unabashedly strict disciplinarian, his father never allowed him to relax. Thanks in part to that hard work, Zen became a top-tier player, and was selected as a candidate for the national table tennis team.

"I think I had some talent," he said.

But he started to feel anxious about competing with China's other elite players. "For a small number of them, they really enjoyed the grueling training," he said. He was not sure he felt the same.

Around that time he encountered Warcraft, a then-popular online game, and got hooked. He rose to the top, thanks to his quick reflexes. He enjoyed the sense of total immersion gaming offers, something lacking in table tennis.

Zen jumped at the opportunity when he was offered a career as a professional gamer in Shanghai. He now belongs to one of the top five League of Legends teams in China. It has a good chance of joining the top 10 globally.

Small-scale tournaments with prizes of several hundred yuan are popular in China.

But gaming is a challenging industry. Operating a high-class League of Legends team costs 20 million to 40 million yuan per year.

The lifestyle is hard on gamers, too. Bilibili's Li, the team manager, says 20% to 30% of the company's esports team is replaced every year. Some players get jobs as coaches, play-by-play announcers or managers after retiring as pros, but most have to return to college or move to other industries.

Many pro gamers develop physical or mental problems. Both Bilibili and Top Sports offer regular psychological counseling at their gaming houses.

Video game addiction, or "gaming disorder," was formally recognized as a mental illness by the World Health Organization in May.

That set off alarm bells in Beijing, which had previously promoted the domestic game market. In November, the government announced new restrictions on online gaming for minors.

There is now a curfew on online gaming for minors. Gamers 18 or younger are banned from playing online between 10 p.m. and 8 a.m., and on weekdays they are allowed to play for only 90 minutes. The regulations also limit the amount of money minors can transfer to their online gaming accounts.

The measure may deter more young people from following Zen's path in becoming star players for esports teams. That could crimp growth for gaming companies like Tencent and deliver a blow to the country's esports industry as a whole.

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