China Lifts Ban On Game Consoles; Microsoft Has Edge Over Rivals

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The sale of foreign video game consoles has been prohibited in China since 2000 because the central government is concerned regarding their harmful effect on the mental health of young people in the country.

The central government of China recently amended its regulations for the China (Shanghai) Pilot Free Trade Zone to encourage foreign investment in the country, particularly in sectors that were previously restricted such as telecommunications, shipping, credit investigation, entertainment venues, and game consoles, among others.

China lifts 13-year ban on game console

China’s State Council lifted the 13-year ban on the production and sales of game consoles in the country. The Ministry of Culture is set to release a detailed policy to be followed by market players in the game console industry.

Game console manufacturers considers opportunity

Last September, Sony Corporation (NYSE:SNE) (TYO:6758), the maker of PlayStation indicated its “great interest” in entering the Chinese market. In response to the latest move of the State Council, the Japanese firm said, “We recognize that China is a promising market. We will continuously study the possibility, but there is no concrete plan at this stage.”

On the other hand, Yasohiro Minagawa, public relations manager for Nintendo Co., Ltd (OTCMKTS:NTDOY) (TYO:7974) said, “This just means one step of the process has been taken.”  According to him, the company is evaluating the opportunity and what it can do in the Shanghai Free Trade Zone.

Microsoft Corporation (NASDAQ:MSFT) entered a $79 million joint venture in gaming with BestTV New Media Co., a subsidiary of Shanghai Media Group to take advantage of the new rules on the free trade zone.

Although the China prohibited the sales of game consoles in the country, Foxconn Technology Co., Ltd. (TPE:2354) had been producing the PlayStation for Sony Corporation (NYSE:SNE) (TYO:6758), Xbox One for Microsoft Corporation (NASDAQ:MSFT) and the Wii for Nintendo Co., Ltd (OTCMKTS:NTDOY) (TYO:7974).

Microsoft has edge over rivals

Chris Green, analyst at Davies Murphy Group, commented that China’s decision to remove the ban on the sales of games consoles is huge news. He said, “This is an enormous market worth potentially tens of billions of dollars. Now this is going to be a race to see who can be first to market, who can get a factory in the Free Trade Zone up and running and get consoles off the production line the fastest.”

Green opined that Microsoft Corporation (NASDAQ:MSFT) has the edge among the game console manufacturers. According to him, “Sony and Nintendo have their own factories but Microsoft outsources its hardware and could be the best-placed to gear up and get a third party electronics contractor to start making the consoles.”

According to the data released during the Annual China Games Industry Conference in December, the video game market in the country grew by 38% to $13.74 billion in 2013.

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