Xbox One Launch in China Is Risky Business for Microsoft

Microsoft made the bold step of releasing the Xbox One in China on the 29^th of September, the first console to be released in the Asian country in 14 years. Chinese authorities had banned the sale of consoles in the country for almost a decade and a half, because they thought playing video games could harm “children’s mental health”. Thankfully they came to their senses and lifted the ban, opening a huge market to console makers like Microsoft, Sony and Nintendo. And Microsoft is the first to dip its toes in the Chinese market.

But this could be a risky venture for Microsoft. For starters, the Xbox One with Kinect retails for $700 (£432), which is a surprising price to say the least. As I discussed in a previous article, this puts the Xbox One at the reach of only the wealthiest Chinese, and makes the console strictly a luxury item in China. The price is actually higher than the UK price, shocking when you consider that the average Englishman enjoys a much higher annual income than the average Chinese. But still, given that China is such a populous country it sure has its share of wealthy people, meaning that Microsoft might sell enough consoles to profit from the China launch.

The Xbox One price of $700 (£432) means it is only within the reach of wealthy Chinese consumers.

Another issue is the tough Chinese censorship. Sadly, China is not a democratic country and any game sold in the country must first have the approval of the Ministry of Culture. This is the reason why the likes of Forza Motorsport 5 and Naughty Kitties (a China exclusive) are among the launch line-up, while the latest Call of Duty instalment and Destiny are not.

So this means that the games available at launch might not be of interest to many Chinese. “I’m not interested in any of the 10 games provided on the Xbox now”, said Wang Song, a Chinese video game developer who has been playing games since elementary school. “I’m waiting for Halo and Titanfall.” But the sad truth is that those games might never be available in China, as the authorities are wary of violent titles like Halo, so they are unlikely to get past the censors.

But no matter how tough the Chinese censors are, hardcore gamers have been enjoying console games even during China’s 14 year ban, as they could easily get hold of the machines and the games in the black market. Microsoft has to worry about the black market, as savvy shoppers who don’t mind taking that route can get a cheaper Xbox One and all the games available in the US and the UK, such as the latest Call of Duty.

Chinese gamers enjoy an Xbox One game in a store in Beijing. There was quite a queue outside, as well.

And what about Microsoft’s competition? You would expect Sony and Nintendo to feel a tinge of jealously after having been beaten to the largest Asian market by an American company like Microsoft. But that is not the case. Sony and Nintendo certainly have their own plans for China, and letting Microsoft take the plunge first might even be part of their strategy.

Nintendo is preparing a specific console tailored for the needs of the Chinese market. And their family friendly games like Super Mario certainly won’t have any trouble getting past the Chinese censors. As for Sony, it can afford to sit pretty for the time being, as the PS4 has a huge sales lead over the Xbox One, although it has made clear that a China launch of the PS4 is imminent. And given that Sony is a Japanese company, it probably has a better understanding of an Asian market like the Chinese one.

So is it all doom and gloom for Microsoft? Not necessarily. It was probably a heart-warming sight for Microsoft CEO Nadela to see a large queue of people waiting outside a Beijing store to get their hands on the first batch of Xbox Ones. This is the kind of thing you would expect to see in Japan, a country were consoles have been around forever, but not in China (although the Xbox One has not sold particularly well in Japan so far…)

A queue of people wait outside a Beijing store to buy an Xbox One on launch day.

Something else to consider is that with its acquisition of Minecraft, Microsoft has a kiddie friendly game that could become a smash hit in China. Chinese gamers have hardly been exposed to the open world building game, and if it turns out to be as popular in China as in the rest of the world, it could become the Xbox One’s killer app in the Asian country.

In the end though, being a first mover can give Microsoft a lead in a huge market like the Chinese one. Microsoft’s adventure is not without risks, though. But if the American company can get a foothold and make the Xbox brand a winner, then being the first to launch a console in China could pay handsomely in the future.