China is the second largest video game market in the world, and even though its industry has faced domestic challenges, China’s global impact on gaming continues to rise. However, if you’re an outsider, figuring out what’s happening in China can sometimes be opaque. That’s why host Aaron Bush is joined today by Josh Ye, a long-time reporter for all things gaming and tech in China.

We dig into how China’s gaming market became massive over the past couple decades and how its current ecosystem compares and contrasts to the West’s. We also discuss the domestic regulatory challenges all gaming companies face in China and how Chinese companies are changing how they pursue international expansion. We hit on several specific companies – including Tencent, NetEase, Bytedance, and Hoyoverse – before wrapping up with some lessons learned and predictions for the future.


We’d also like to thank Overwolf for making this episode possible! Whether you're a gamer, creator, or game studio, Overwolf is the ultimate destination for integrating UGC in games! You can check out all Overwolf has to offer at

This transcript is machine-generated, and we apologize for any errors.

Aaron: Hi, everyone. I'm your host, Aaron Bush. And today I'm delighted to be joined by Josh. Yeah, Josh is on the cusp of a career change, but is a longtime reporter having worked at organizations like the South China Morning Post and Reuters most recently, but I wanted him to hop on the podcast today because for years, Josh's work has been it.

One of my go-to resources for staying on top of what's happening in China's gaming market, as well as tech more broadly. He's expertly covered all of the big China, sorry, three, two, one. He's expertly covered all of the big Chinese companies in our space, all the regulatory news, what's going on with AI right now and more.

So today we're going to discuss the state of the Chinese gaming industry. What the big players are up to and what we can learn from what's different over there. So with all of that said, Josh, welcome to the Naavik gaming podcast. Thank you, Aaron. It's a pleasure to be here. Awesome. So before diving into all the details, Josh, could you just quickly tell us the story of your career?

How did you get into reporting and what all did you cover?

Josh: Yeah. I restarted my journalism career when I was still in university. I was writing for a school's newspaper. And actually I started as a philosophy major, but then I realized that, the world is really not about cohort logics and, it's more about people's feelings and people's, emotions and all of that.

So I became, a school newspaper reporter So that's like 10 years ago. So I've been writing for 10 years. At the time I reported a lot on Chinese immigrants ethnic minorities, issues, on campus and around the university of Pittsburgh, I went to university of Pittsburgh.

 And after that, I went, we went back to Hong Kong and started my career. At the South China Morning Post as a business reporter later, specialize and focus on tech and with gaming and entertainment and social media as my bread and butter. And a couple of years ago, I moved to Reuters and other terrific another terrific organization.

Josh: And with that, it's also like my focus has been, on software, online entertainment online services, and just, I was the main Software internet industry reporter. So yeah that's how it all started. But then I feel like, gaming really became a focus for me, a highlight for me because I grew up when I was still at university.

I grew up with a bunch of Asian kids. They really bonded through playing, League of Legends together. That was the time when League of Legends really took off. And and it was like, wow, the power of a competitive gaming eSports is really a new experience that unlike anything we've seen before.

So that kind of, sown a seed in me. And then when I went to Hong Kong, I do business did business reporting. What came to my mind again is that, Like few people knew that, Riot was owned by Tencent, it's such an undertold story at the time. Tencent was unleashing a bunch of, new, interesting games, not just Tencent, right. and that piece, , a new crop of Chinese gaming companies. For me, that would just, like the most fascinating story. I dream of, Rick writing a book and writing, long form stories about it. But then, yeah, and then just re put myself, you know, on,

 There's a new speed and then, being able to break a lot of very interesting stories and then tell it to the rest of the world. So yeah, long story short, grew up in a dorm with a bunch of geeks, playing video games. And then, that kind of just set my career path off.

Aaron: That's awesome. And so if you look back at the past several years of you doing reporting as your career especially in gaming, I'm just curious. Are there any stories that you like firmly remember that stood out to you at the time or were just really interesting to go through as they were? As those events were unfolding.

Josh: Yeah, I think a few stories come to mind, right? Like I just said, at the time, League of Legends took off. So the rise of Chinese esports, right? At the time, it was just a bunch of geeks, like I said, playing. And then all of a sudden, you got big major leagues coming through. And then the formation of the Chinese League of Legends leagues, like LPL.

That was crazy. And and then when Chinese teams won the world's, a couple of years ago, we're talking about a hundred million users watching, tuning in to watch the game and that's Like a crazy amount, like even super bowl, it doesn't ask, no, that doesn't reach that level.

And now, it's a bit of a very interesting, transition period, people are making different moves about how they kind of position these sports and all that. So it's still an ongoing story. But yeah, so that's one story that really comes to mind.

I guess it's more gradual collection of stories and then one specific story. And I think also on the, just, gaming product side of things what was very fascinating at a time was, I don't know, I don't know if you remember explosion of, the battle royale genre. That was the first time.

Yeah. That was the first time I felt like, mobile gaming really solidifies place in the gaming ecosystem. Because, no, before that we got like Honor Kings, a bunch of blah, blah, blah, blah. But there still isn't, there still wasn't a consensus whether, a hardcore gaming experience can be replicated onto a smartphone, right?

But then with PUBG Mobile and then, Knives Out and all these, these are full fledged, open, like big battle It was a third person shooter just got crammed into a little device that you can play. And it was crazy. And then all these kind of Chinese companies just raised the clock to provide to produce these kinds of products.

And to me, that was like, okay, maybe this is serious. No, this is not just no candy crush anymore. And we're at a whole different level. And and a lot of companies are capable of doing that. So I feel like that was also : another interesting, sorry.

Aaron: No, those are great. Those are all huge pivotal moments for our industry in which China companies in China, we're at the tip of the spear and bringing those movements to life. So that's fascinating. And I teased it in the intro that you're on the cusp of a career change, but maybe you can quickly fill the audience in on what you're up to next.

And then we can dive into. The meat of the discussion.

Josh: Sure. Yeah. I spent the past couple of years at Reuters recovering for fun in the gaming industry. And now I'm on, I'm in the process of joining VSPL, which is Asia's biggest e sports company as their head of international comps.

This opportunity came about because I knew Dino, who's the founder of the company, and that he's. Lobbying me a couple of times Josh, come on board. This is a big opportunity. And then like I said, e sports is such a big phenomenon in China right now, people are talking about, the industry's facing a bit of a adjustment.

I feel like the story is kind of, uh, fell out of focus a bit, but I think, it's because of that, in me there's a fire that I felt like, this is actually still a long term story, maybe people's attention span, it's a bit short and then, they just, you face some obstacles and then they forgot about it, but I think the fundamentals out there.

 They say that, you go in when people are not looking, right? So I feel like this is, This is a bit of a time that, people underestimate the industry. And then uh, you know, Dino really wants my help because, if you're actually paying attention right now, we have a lot of big moments, facing e sports, e sports are trying to get itself into maybe the Olympic conversation, e sports world cup is happening.

So these are all next level stuff because, in China, that last year e sports already became a metal sport in Asian game. So I started, it's very interesting. I started. Covering e sports when it first as a C game, so Southeast Asia game as a a metal sport. And then was it a, and then, got to Asia games.

And then now we're talking about, maybe an X slope. So Dina has this idea and then a lot of me make pro very hard. He wants, people to really be able to help me as PO get out there because previously is PO just more of a two week company, comfortable Not comfortable, but more focused on building out his Chinese business.

But you probably are aware that, savvy invested a bunch in VSPO and then, that uptells, but no, his vision to repush the company outside of the transport. So right now it's a very interesting time. For me it's a great challenge and, being at this company.

Actually, I get to touch so many different products, right? And it's not just one particular product. I don't get stuck in one particular product. So for me yeah, that's, that's what I'm up to right now.

Aaron: That's exciting. And I'm excited to see where the business goes from here, especially if they're really pushing on expansion.

I was going to ask this question later in the conversation, but since we're talking about e sports now I'll pull it up. As you alluded to, there's been quite a lot of change in the e sports landscape, like in the West the several businesses have had massive cuts, companies that have gone public have basically been forced to go private again, there's been bankruptcies, major turnover, and in the big leagues and even some leagues have had to shut down or restructure themselves.

How does that compare to what's going on in the China e sports landscape? Is there a similar? Business model shift going on. Has it been healthier over there over the past couple of years? How does it contrast to what we see in the West?

Josh: I mean, I don't want to sugarcoat it, right? Cause the industry itself is facing an adjustment due to a couple of things, gaming product cycles, as well as, post COVID, people are trying to really figure out a sustainable business model.

And those are the long term, factors that we do. And in China industry is facing some, transition, but I would say that actually VSPOs, decision and then, financial health is still very healthy. That's why, I feel like this is the right time to go in because what I see is the opportunity, right?

Sponsorship money right now is still nowhere compared to, sports, sponsorship money. But at least in this field case, we've been able to be able to stabilize it. And then, actually it's near steady growth. So we don't see a declining interest and, brands and companies trying to commercialize and advertise.

Through e sports. So for me, that's, when I asked, about, about all the questions you just asked, and then he told me that he was like, yeah, so we are. We're not cratering in any sort of sense. Actually, we're seeing a slight uptick. Sure. We'll let the growth to be stronger, but we are on a very kind of solid foundation and and, but you just look at the upside.

It's crazy, right? This is the. That the goal that we're trying to try and trying to reach. And another, I feel like another story of that is that you have to look at, how it was back then, in, in the beginning when Isabel started the company.

Telling me that they're knocking on people's door, knocking on brand's door to ask them to collaborate, to maybe, figure out some, so some ways to work together. But now it's actually a little different, right? Because the honor of Kings, People were actually knocking on our door, trying to, sponsor these, competitions.

So it's very different and because of the sort of broadcasting table the product placement can only fit so many products. So it's amazing this is again, another undertold story that really, uh, got my interest. So you talk about e sports right now in China. We're talking about being able to really connect near the China ecosystem with the rest of the world.

So that's why, Dino's very hard on the point of. Integrating with, the eSports World Cup as well as, potentially Olympics, and doing all that.

Aaron: Cool. I appreciate you breaking that down. But let's go ahead and zoom back out, obviously, china's gaming market is now the second largest gaming market in the world, but it's very close to being on par with the size of the U S gaming market.

I think just off by a couple of billion and annual revenue. And obviously it's trajectory over the past couple of decades has been pretty monumental. And there are a lot of, elements of the rise that I think Many of us are aware of the rise of piggybacking off of big platforms, really leveraging mobile, et cetera.

But as you look back at the rise of China's gaming market. Are there any elements to that rise that you think might surprise people who haven't been paying super close attention or have just been far away from that landscape?

Josh: Yeah. If you're talking about 10 to 20 years ago, 20 years ago, that is like when Or the warcraft, first came about, right?

I feel like that was a big moment for China. Actually I think that's sown the seed for, now we're talking about China live service, free to play and all these kinds of, paradigms as, associated with, Chinese industry, so World of Warcraft, came out, that was the first time, China really embraced a big foreign game in such a massive way that, that we're talking about, tens of millions of people playing it together, that, that's, that, that show the power of, what a online, piece of entertainment can really get to the potential, the enormous potential of, such a big online game, yeah. And um, because it was crazy, it's like you're playing in one province and then you're matching up with another guy, in other province you guys are next door neighbors. That was unlike anything we've seen before. And what I said that you was on the seat for future developments, because.

That's when a period of time that all my friends, any cool friends, they went to internet cafe and just spend time doing playing World of Warcraft. And unlike in the West where, you guys grew up with console games, you guys buy games, own games, that kind of.

solidify the consumer behavior where you own games, right? But with World of Warcraft, because it's so massively popular, people are so used to just going, logging in and playing games and that not owning them, right? And that in some cases they're free to play, but World of Warcraft a lot of times you have to buy credits and you have to play for a certain duration.

But still that kind of consumer behavior cemented during that period of time. So not a lot of people talk about, yeah, I don't understand why it wasn't, the Asian market is such a way it really started that, the MMO period the MMO era it's this where, consumer behavior formed.

 So yeah, I wouldn't call this a surprise, but, I feel like this is a under told story that, that comes up a lot that explained to a lot of the Western audience that why. Live service are, have been developed, in such a sophisticated way in China, because, everybody trying to model their business model with WordPress at the time.

And then that translated into later on the big PC NMOs and then later on the mobile gaming era. And when, online mobile payment really became a reality, this thing just got supercharged. And then now this is the most profitable and most mature way to run a game.


Aaron: Interesting. I didn't realize that World of Warcraft sent a benchmark that inspired set a baseline for many other games to build on top of I guess a similar question in terms of what we see today. Obviously, there are differences in the composition of China's gaming market to other parts of the world.

It's very mobile centric, very free to play centric. But are there other elements to China's gaming market today in terms of how it differs from other parts of the world that similarly, might surprise people who aren't paying close attention.

Josh: Yeah, I think it's the story is actually interesting because it's a bit of a course correction story.

Like I just told you now people associate, Chinese gaming with Live service and free to play games. Actually, like things are coming full circle, right? Chinese gamers taste a matured, like I said before, they couldn't afford a game. And now they, the spending power has increased and then the taste has matured.

So now we're talking about a lot of Chinese companies trying to make AAA games. Because that's what the players want. They're like, okay, we're playing, we were satisfied with, the big maybe that the big MMOs, maybe with master graphics, but now we want the top, right?

That's why we're talking about black metal, we'll call, and, like a lot of, a lot of hype is, rally around these titles is because they represent, whether China's able Make these kind of top of the line, the AAA games. So it's national pride on the line, or Chinese industries, pry on the line because we're so good at, opera was it uh, running a game.

But that now can be produced artistically the highest level. Yeah. So yeah, a lot. A lot of the companies are trying to push these kind of triple AP, Sony, they started, uh, have accelerated trying to to help, a lot of the console game developments in China, a couple of years ago.

And then if you look at last Sentinel by it was a 10 cent, that got teased at the against the war. That's also a very interesting endeavor all of that, point to the direction that. Chinese gaming fans, they want to see a China, you know, made in China, AAA quality game.

Aaron: Really interesting.

And we'll get back to some nuance of that a bit later, especially in terms of like how this can be a tactic for Chinese companies also. Expand internationally when they're under pressure at home in some ways, which leads me to just a big topic that's super relevant to what's going on, which is regulation on minors on business models on game approvals on all sorts of elements of what runs China's gaming market, and we don't need to rehash what all of the You Regulations are, I feel like our audience is aware of the highlights, but can you maybe dig one layer deeper and speak to what the actual impact of these regulations have been on the gaming ecosystem?

Like, how has the company landscape or just the ecosystem landscape changed? Because of the, just as a result of like new rules that have been set forth or how priorities have shifted at all however you want to take that. I'm just curious to hear your thoughts.

Josh: 2017 we have about 10, 000, game approvals.

To formally release a game in China, you need approval from the government. We have about 10, 000 approvals granted that year. And the past couple of years, we're talking about fewer than 1000. And this year actually is bouncing back quite, in a strong way. We're looking at maybe 1500.

, Yeah, fact check that, but, doing the first half of this year we already getting a lot of approvals because it's a bit of a ongoing kind of dynamic with, the industry and the government, unlike in the U S or in the West where the industry self regulate, here the game industry does have a very let's have to engage darling for quite a bit because the garden when it's a regular long story short, you see the trajectory of, game approval become a lot tighter, that's for sure.

And so with that being said, and the regulations are part of the gaming landscape, the feature of it, right? You have to live and breathe and be comfortable with it. you talk, if you listen to all the earnings call by big companies, they're saying that this is the new normal.

So if somehow you have a sense, somehow you feel like it's going to go away. It's not going to go away. But with that being said how that changed. The Chinese gaming landscape, that because you have to get approvals, that's why actually you have to partner with big companies, you had the power with, companies that, that we know what the government wants and then, can be able to comply with a lot different rules. So yeah, I'll always say that, we're seeing a bit about consolidation, because of the. The the regulation here, another thing that you have to understand, the regulation side which I had is is.

It's actually, the industry is in constant conversation with with the regulators. So that's why this year we see an increased number of, game approvals that's a sign that's indicative of the government's willingness to to see more products on the market. So yeah, roughly that's the lay of the land right now.

Aaron: Yeah. I guess to just double click into your consolidation point It makes sense to me, just big picture, that if there are going to be game approval freezes, or time periods in which it goes really slow, but also just more rules that you have to pay attention to, that favors a Larger companies who can withstand darker winters where you can't launch new games has a bunch of other big games that are already on the market or other parts of your business.

You're probably fine. Although you don't love what's going on. But if you're a startup who's working on their first game or their second game that could put you in a really difficult position, can you speak to any shakeup? In the market that you saw because of these regulatory challenges.

Josh: We are now at a point in time where, it's very difficult for these kind of, smaller teams, that's for sure. In the past, when regulations are, there are a whole lot more posts it was easier for them to find a way. To get their products on, onto the market.

So for these companies, for smaller teams right now is for sure without that very difficult. Because like you said, it's a very complex process and, getting approvals and all. Because of, that's the last gave it is that, a lot of them have to find ways to get funding from Ted said, or like somehow align itself with these kind of, industry giant giants and a lot of them because of, pet regulations at home.

They're also thinking about going overseas, right? Be launching their products. Overseas, from day one, actually they kind of plan and conceive the product, from the get go as an international product. So that's why you're seeing a lot of very interesting, maybe, a smaller workshop, type of titles coming onto steam and other places, and then they may buy new Chinese companies.

So yeah, that's sort of the landscape of banks.

Aaron: Yeah, which is really interesting and I know you primarily follow the larger companies and just like the big changes that happen around tech and entertainment, but do you have any sense of what the impact of this has been on like the venture investing markets like has that been crippled in China because of these actions or is it coming back to life as game approvals are starting to You It's a reverse course.

Do you have any sense of what that looks like?

Josh: Yeah. The VC side of things, it's very quiet due to a lot of reasons, not just. Not just regulations, so the funding cycle things, investors interest also changed. So right now it's very difficult unlike, in previous years when you get big investments and all that, but that being said, I think right now the Chinese the Chinese gaming market is so competitive.

If you really do have a very strong team and you will you'll get noticed. So for example, a couple of years ago when Genshin Impact first arrived everybody was trying to think, okay, how can I, what's it get the next, Genshin Impact, and how do I. Develop that.

If you have a team that are capable of doing that, you'll get, picked up and noticed by, big players very quickly. So point two, it's not, Genshin, look light or anything like that, but, in the same genre, Kuro Games it's a very interesting company.

They just launched Weathering Waves. I don't know if you've heard they've been making a lot of waves no pun intended on different, platforms. So it's also an open world, story driven. Enemy style game and yeah, they're getting a lot of interest, they were invested by your games, which is our sister company, BSPF sister company.

And then more notably pencil, pencil is a big backer right now. Because everybody sees that, there's the opportunity in this vertical. So yeah, so you have a strong team and then you are savvy enough to be able to position your game. Towards the big giants, there's opportunity that Gotcha.

Aaron: And do you have any sense of how the regulatory environment could shift over the rest of the year or deeper into the future? Maybe it's totally unpredictable. But what are your thoughts on looking forward?

Josh: I think I can say that, for the rest of the year is looking we getting a quite friendly regulation regulatory landscape.

Okay. Because like I said, the sheer amount of, approvals that being issued over the past six months has been very pleasant. So if you look at the Chinese gaming industry, actually, I feel like the bounce back of the industry is the total store people. Maybe it's still early on.

So that's why people felt like. We are so sure we're not so sure about it. But now you see Tencent, putting out big titles like, DNF, Dungeons and Fighters Mobile. That's a that, that's a very profitable product. And then, in the pipeline you got, Delta Force if you asked Alamo, if you see trade also amazing, and then by the way, these games are.

A lot of them are, developed with, console and PC in mind. Either in Delta Force, I think maybe it's, like console, PC first, it's not even like a mobile game. So they I guess contradict Tencent's reputation as a mobile first company, but that attests to the point where the Chinese companies, we want to do a triple A games, and then also, what was it? Arena Breakout Infinite, which is Arena Breakout game. On mobile coming to PC, also a very high quality games. So this year is going to be exciting. It's already very exciting. I said, Wuthering waves, Blackmuth, Google com looking back, maybe this is one of the more, more exciting years because in the past couple of years, actually, I don't know, innovation has been kept boring.

But this year, maybe, the second half of the year could really pack a punch.

Aaron: Cool. Sounds like the floodgates are opening, but the looking longer term is more difficult. So I guess switching gears and looking beyond China's walls as a result of these tighter domestic, Markets, a few big Chinese gaming companies have definitely prioritized growing and international markets.

And obviously that's not new. This has been the case for a long time. And we've seen companies like Tencent have really aggressive M and A strategies over the years, or companies like like NetEase or even Hoyaverse with Genshin Impact and others like have a very international approach to launching new games and.

hitting multiple markets. But I'm curious how you think this will play out over the next decade because with this rising wave of AAA games, which naturally are more competitive and in global markets, how do you think China's imprints on the global gaming industry? Or it's market share potential.

How do you think that could change over the next few years because of these shifts that you're seeing?

Josh: Yeah, I think, like you said on the investment side of things, Tencent have been investing foreign studios for quite a while now they've been successful. So that's not new, but I do want to point to right now we are at a very interesting period of time.

A very interesting year that that the homegrown, AAA video games, from China it's about time, right? We see, whether they're really at that level pens and build their own studios in North America, Europe, across the world.

They are gearing up, themselves, towards that goal. I think right now is a bit of a time that you've got to show you, you've got to show your real results. And so we will see, at this point in time, we saw that, a little too earlier, the last said, no that's probably one of the most promising developments are coming out of pen offensive.

Cause prior to that, cause prior to that, they essentially pay a lot of tuition. A lot of, projects got shelved, a lot of projects, got a lot of projects got shelved or, some of the projects right now are just, going through difficult times.

So it wasn't clear, but now, yeah, I'll look, I always say that right now is about time for them to show some products.

Aaron: Yeah, so I guess how I see this is there is an element of this, which is games that are being made in China that are bigger production value. They're coming online, they're targeting the whole world and they probably will have some type of impact.

And then there's another piece of it, which is games that are not made in China. In China, but they're made by Tencent and NetEase who have set up shop around the world primarily in North America with new studios. And they're doing that because the older model of M& A of acquiring other businesses with proven IPs and such, that's not as possible.

Anymore for geopolitical reasons. And so they're taking this other path, which is higher risk, because you're not getting something that's already proven out, but it's also potentially a higher reward because you're starting at zero and have the potential to build something pretty big and meaningful, even though it takes more time to get off the ground.

And I know Nettie's has leaned very heavily and into that. Tactic and intense sense to some degree too. I'm not sure about others but I'm curious what you think like specifically about, about that part, about how Chinese companies have been skirting the regulatory lens by starting studios from scratch in places like the U S And hiring like Western teams to build those games.

Do you think that strategy is going to stick for the long run and become more meaningful for these businesses? Or do you think that will just continue to evolve as geopolitics continues to evolve?

Josh: Yeah, I think geopolitical pressure is definitely a factor. But. I think, overall, if you really want to look at, Pence and zone, vision of things, or, net easing mission, thanks.

For them, okay. On the IP side of things, if you keep licensing others, people's IP you got to share the revenue. When the market is so competitive, best, one factor consider whether you really want a very. Dated IP, maybe still have some hole, we're not so sure.

And then that's one factor, right? So we're not seeing, I actually did a story on this, with Reuters a couple of months ago that homegrown IPs is a prized possession. And actually, if you look at, the gaming market right now, I don't think fans are, crazy about all IPs.

There's a bit of a realization of that. And then second if you look at, these kind of global Chinese conglomerates they want to build up the actual production capacity. They talk about, in Tencent's case, talk about the industrialization, the game making, game making process, within Tencent, right?

So they want to actually break through all the silos and then, they own the capability of produce these kind of high level games, because that's what. What you said, Western game awards, they want AAA games and that even in China, you really have to show that you have the capability with top notch graphics, everything else to convince that, people that you're still like, so the big dogs in the industry.

So from a, in, so capability build up perspective, that's also called for. Yeah. From a sort of. The production capability, though, a point of view, that's also a factor that, that's why the building up, big in house studios, on different continents. And then I think, maybe the third thing is just talents, these companies want to, we do want to source different talents, in China everybody's monetization and live service.

But when it comes to art, especially if you want to grow internationally, expand internationally, you need to have, foreign talents and more tuned to the sort of artistic preferences of Western players. Right. So, um, Previously, like you said, maybe investments and you're good enough.

And then you, that you brand that as a different product, you know, like Riot. Supercell did their own products, but now if you really want to build up the in house capability you have to do that. And that in the long term that's the direction to go. And like I said, right now it's in a very interesting time, it's a bit of a a midterm, checkup to see whether they are doing it well.

Aaron: Yeah. And that's all a good, thought out answer. And it's also an interesting time because of AI and in the West um, AI is all the rage where it's probably, even in gaming, it's more hype than substance right now, but you still are seeing like really interesting things happening on the fringes.

And now even a lot of big companies are talking about how they're excited for the efficiencies and cost savings that will come with, with AI. And it's, creating a startup and venture boom around it. Could you tell us about what that looks like in the in China. Is the excitement at a similar level in the games industry to what we're seeing elsewhere in the world?

Or are there like other unique aspects to like how teams and entrepreneurs are thinking about this technology in the games industry in China?

Josh: I imagine it's not too dissimilar, right? In China, AI is also all the rage. But then like you said, right now we are, at a point where we don't know how to actually integrate it into fully developed products, it's more gimmicks features that we try and test things out.

And yeah, so some of the art can be done, very quickly with AI, but we have a few incidents where, people picked up that, such and such artworks were developed by AI. And yeah, people just rioted against it. . So are you re are we really ready enough to put that to work?

Right now it's still a question, but what I would say is that in you listen to your earn census earnings call, they are actually quite cautious. They talk about AI a lot, but that they're quite cautious about ai, actual AI products rollout, promising ai products rollout.

It's because of that, right? No, I guess in their case, they, the executives are saying that, right now it's still, they're even not like they're not the most aggressive type, let me just say, when I went to a lot of the different conferences, they do talk about AI agents, being interesting, being an interesting use case and potentially be deployed into games, NPCs, AI and NPCs but still early talk.

We'll have to see what comes out of it.

Aaron: Gotcha. That makes sense. I I'm especially curious in the case of Tencent because not only is it the largest gaming company in the world, but it's also just one of the largest tech companies in the world. And especially in China is just positioned to have a touch point on basically everyone's life and a multitude.

Of ways and is like a core source of R and D in the country of where AI innovation would probably come from in part. And so what we see from Tencent will just be really interesting and could be a telling for what other companies think to do Over time, but I guess we have to wait for that story to play out some more.

But with that, I actually thought it would be interesting to spend a few minutes talking about specific companies companies like Tencent, Netease, et cetera, and just get your take on what's. interesting or notable about these businesses right now that, if you're not paying close attention, you probably wouldn't see.

And maybe we can start with Tencent. I'm curious what your general outlook for the largest gaming company in the world is, but also if there's just anything super interesting to you about the business right now.

Josh: Yeah, I think I, I still touched on, some of the big titles that are about to release just now, and I think another, I think interesting thing about Kensington right now is the rethinking about the platform strategy. Maybe in the West, people already took. The robot success for granted, and then now when you're all these kind of Chinese gaming companies are thinking along the same line, how do we replicate, robot success, but in a Chinese context so when they talk about mini games so like the mini apps and all that there'll be actually, if you talk more, listen to their executives, they're thinking along that line.

Aaron: You, you would think that, or is it… Explain, could you maybe explain what many apps are for people that don't know how that works?

Josh: Yeah. So many ads is essentially, you pull out you, you pull up a WeChat and then, Within WeChat, you search a certain game. So if there's a panel, you get up for interesting games and then it, it loads immediately.

Instantly. So it's only like games, on maybe different messaging apps and doing that in the West have tested before, but not to the same level of success, but right now they're actually getting quite a bit of traction on on, on WeChat. When you listen to the Tencent excited to talk about this, they're really thinking about platform strategy.

This is odd, right? Because you feel like, okay, maybe this is like a Facebook H5 games, that title, like that's more what we're thinking about, but then in their mind that we are planning, they're really referencing the Roblox platform strategy. What they see for WeChat is so much more complex and so much more sophisticated.

Yeah, so that's one aspect of it. And I think you wanted to talk about that East too. And I think maybe just tie it into this conversation as well. That is, it's also thinking about us the same way. Say Nelly's also thinking along the same line. Biggest.

New title for NetEase is Aggie Party, over past 18 months. If you really think about it, the success of Aggie Party really came about because there's a vacuum that left for, robots absence in China. That game feature, feature a lot of the same functions as Roblox, UGC centric, they heavily focus on allowing players to create maps and create levels.

Within that game. And then it's a party game. It's easy to play. So I think, yeah, I personally feel like, a part of it because no Roblox isn't officially available in China, but then these kinds of big players already saw that, Roblox success is a great reference and that, it will be able to gain a big market share in China.

And then that's why they're thinking along those lines.

Aaron: Very cool. Yeah. Interesting. Hadn't thought about that. But the UGC wave would probably hit China a bit differently than what we've seen elsewhere in the world. With Roblox and Fortnite and UEFN how about ByteDance?

I guess, first of all, like what's going on with ByteDance and gaming right now? Because it seems like they, several months ago, they basically said that they were. Going to sell new verse, which was like their big publisher and just rethink gaming as a whole in the context of their business.

And maybe that's changed, but I don't know, maybe you can just talk about what the heck is going on there. And if there is anything interesting still going on, we'd love for you to highlight that too.

Josh: Yeah. By this, that's very interesting because, when they first. Became this, new Chinese giants they are, we trying to rival Tencent, and then Tencent, the big gaming footprint and they choose to think about, okay, we need to go for content and we need to go for. Gaming, so that's a sort of a historical background but at this core, Tencent is very committed to becoming a platform as well as a content company, but then by this is still at his core and more platform company.

So I think at a high level of thinking at the time when they were like, okay, with a new versus actually worth continuing to pursue, they were like, our identity is a platform company. So they felt like, gaming, maybe it's not paying off. But again, they're trying to sell off for us at a lot of the gaming projects, which a lot of them have got sold made a mistake about it.

One thing that didn't get sold as Munta. The developer of the mobile legend spec, but it's first of all, The company got acquired very high valuation, and it's a very interesting company with a lot of capability. And after a few months of testing the market and all that I think last month they decided that, they're not no longer selling.

So they look like they're giving it a second try, at least at some level, and then they appointed a new head for the gaming division. So don't represent. They're still trying. Test out whether, where they can go with some of their gaming efforts. But yeah, I think that's the the pivot earlier was late last year when they decided to retreat from gaming.

It was because of that thinking, right? They feel like the retail platform company content, they're still trying to figure it out. But yeah, so that's, the latest demo.

Aaron: Gotcha. So still figuring it out. How about Hoyaverse? They seem to have figured it out. A decent amount. Um, you know, They're the latest, mega gaming company from China to break through globally more than once now.

First with Genshin Impact, now with Honkai StarRail, and I'm sure they're working on a bunch of other interesting titles. What do you think about them? Are you excited about their future? Anything interesting? Anything? That you want to call out that maybe people are sleeping on.

Josh: Yeah. With holdovers, Genshin impact, actually before Genshin impact, you already got Honkai impact third you play, that was time.

A very interesting title. So, Wow, I mean, this game is so good, but then, when they released the trailer by the wall, sorry, when they released the trailer for for Genshin Impact and then, got such a big backlash. And then I don't know how to feel about this company. But now they proved themselves, you know, twice again, right?

Genshin Impact's success is Honkai Star Rail. And the next one is the ZZZ. So the Zenless Zone Zero. Zone zero, yeah. That gave out a lot of hype, a lot of, a lot of eyeballs in China. And then it looks like, it could be a very big success for them as well.

Aaron: So thanks for sharing your thoughts on, some of the biggest gaming companies in China. Are there any other companies that are maybe less well known that you think are super interesting that others around the world should be aware of? Maybe they'll break out and be the next Hoyaverse and in their own way or, something else.

Anything you want to call out?

Josh: Yeah, this, I think I already alluded to them before. So the developer of black metal call, if you're like two, it's always triple A combat, heavy being, buying a full call right now. It's the big Chinese game coming up.

So game science is the developer of it. Definitely watch out for what they do. They were invested by Fenton and that ESPL is Boston. I also invested it as an angel investor. Very interesting game. And then Wuthering Waves, just came out also like that. I really took it for very interesting combat, focus cross platform anime style game.

So that's Kuro Games, based in Guangzhou. Also a very interesting company definitely watch out for what they do. And yeah, so those are the two, two games that, come to mind for sure.

Aaron: A couple final questions here before we wrap up. First of all, are there any innovations happening in China right now around China's gaming market that we should pay closer attention to?

Maybe it's game design related. Maybe it's technology related or, something interesting going on in a particular. Genre any innovations that you think could go global that is starting in China right now?

Josh: I think with games specifically is the trend of, cross platform games being developed in China, right?

Like I said, it's crazy that, right now they're really bridging the different platforms. Previously we thought that, China just uh, uh, mobile, you know, mobile game specialist right now then we're moving that expertise to, the different traditional platforms, consoles, a PC, et cetera.

And largely, because, that, that does, that is because the emergence of not real engine the more sophisticated engine that can be used in your cross platform. So with, yeah, so look out for, so look out for, , Chinese gaming companies speak. So that leaders. Leading that way. It's opening your cross platform gates.

Aaron: Yeah, I think the cross platform trend is a good one to call out. And it's interesting too, because it's not new. I think you probably could have said that four years ago when Genshin Impact, broke out and took over the world and everyone was like, whoa, what's happening here?

That this is a moment. And for whatever reason, that type of success has not really been replicated well and other parts of the world. So I think you're right. It really, it has been China's China, holding the spear and pushing the spear out to the rest of the world.

Josh: Yeah. Cause that was just one game, right?

Right now we're talking about paradigm shifts where a lot of the games are going that direction. That, that's also kudos to like, you know, uh, Mihoyo. For being able to pioneer that trend four years prior. But now, this is certainly going to be a big trend.

Aaron: Yeah. And another question for you here, I'm curious what your outlook is for gaming in China, beyond the most popular platforms today, so mobile and and PC like what do you think the future is for console VR, alternative gaming hardware, um, maybe they're interesting growth stories going on right now, or innovations and, China's tech market that are gearing up for other types of hardware, but anything stand out to you beyond mobile and PC that could impact gaming in the country?

Josh: Yeah, I think you alluded to VR. VR is certainly a big direction that people are thinking about. And they do look at a lot of hardware for. Oculus as well as the Apple vision pro, they come from China. So a lot of people are already very familiar with the hardware and a lot of the new VR XR brands actually also coming out of China.

I've been to many such conferences, XR VR conferences, and a lot of people are thinking very hard about this and it will really trace, China's success in the gaming industry is because. The arrival of the the mobile gaming era. Chinese gaming companies were very fast and very capable of developing mobile games from the get go when, people are still looking at it as a niche market.

So don't be surprised that. When VR become more mature a lot of these kinds of content will be made by Chinese teams. Like I said, because we got a lot of hardware specialists in China already very familiar with the ecosystem and then a lot of homegrown XR VR brands. And then if you look at and Rio TCL all these brands are, doing their versions of the XR.

Cause I guess, In China it's easier to put together these kind of new products because the supply chain is here, you know, we can quickly assemble some demo and then they'll get some money and then roll it out to market and then test it within the Chinese market.

So if you guys are not familiar with, developments in the if you guys are not familiar with the Chinese market, certainly look out for some of the VR and XR products coming out of China, both on the hardware and the software side of things, but I don't know. Personally, I'm still not a hundred percent sold on whether XR VR is going to be The platform, the ultimate was a platform before, before we digitize ourselves and the upload of consciousness into the cloud.

I don't I'm not a hundred percent sensible on it yet, but I feel like all the sci fi movies point to that as the ultimate way of doing it. I don't know. It wasn't, we don't get the same level of consensus as, smartphone came about. Is that everybody feel like, okay, this is a surefire way for how people would track with gadgets in the future.

Aaron: Yeah. I think that's fair, but it still is interesting though. Especially if I don't know how like a company like Meta will open or open source their They're like operating systems, similar to how Google open source Android in the past and through open sourcing Android enabled companies all around the world.

Like in China, where much of the supply chain is to build on Android and fork Android and create their own ecosystems on it. And, through that got a bunch of the big Chinese tech companies that we see. Today. And yeah, maybe there's some similar parallel to that over the next decade or so with whatever VR XR is going to be still super early.

China will probably even have their own competing operating systems and such to from some of these big tech companies. But yeah, really curious to see how that goes. Very final question for you, Josh. We covered a lot here today. But is there anything else that you're Excited about for the future.

It doesn't have to be China related, any game or company or trend that has been extra on your mind lately that you want to give a final shout out to?

Josh: Another very interesting thing about hardware was that that the arrival of like steam deck, where you changed, that the rival like, you know, the same thing is there better be loved with, piece of artwork by, by gamers, and then if you look at, Steam Deck Alternatives, a lot of the brands like IO some of the, so the 1X, was it 1XP? 1PlayerX? Sorry. I'll just not mention the names. So if you look at a lot of the, sort of the Steam Deck Alternatives hardware handheld, gaming PCs.

Like many of them are Chinese. So a lot of the Chinese, hardware makers, and they're already thinking along this kind of form factors, right? Yeah, Lenovo had like Legion as a Legion brand, they go. We're with a handheld PC and that are the lesser known names, they're based in Shenzhen.

I try some of those products are very compelling. So handheld is also a very interesting space to look out for I think once it's some of the bigger companies, console makers are also thinking about maybe efficient, consider handheld again. So yeah.

Aaron: Yeah, that's a great point too.

So we'll be on the lookout for interesting hardware innovations to come out of China, but also handheld innovations too. I guess it's the benefit of there being. Really complex and proven supply chains at the cutting edge to bring many versions of this to life to compete in the market. But also Josh, very final question.

If anyone wants to get in touch with you or follow along with whatever it is you're doing where should they go?

Josh: Yeah. I'm very active on Twitter. So by Twitter handles by Josh. And that's that's the best way to kind of attract, but we also have a personal website and, if you go out to my Twitter, you'll find it there I kind of show all the stories I've done in the past with different publications and then uh, yeah so, you know, follow me on Twitter.

That's the best way to get in touch.

Aaron: Awesome. Josh, let's go ahead and wrap it up here. Great job. And thank you for hopping on today.

Josh: Thank you, Aaron. It's a very interesting conversation for sure.

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