Game enthusiasts form teams to play the online video game “Splatoon” in Shanghai, on Oct. 22, 2022. Photo: CFP

Since the 18th CPC National Congress, China’s cultural industry has shifted from a stage of rapid growth to the pursuit of high-quality development. Overall, it has made historic achievements and changes in the process of following tradition and seeking innovation, making the industrial environment healthier and clearer. At present, the cultural industry has demonstrated great innovation vitality and development potential under the national cultural digitization strategy. However, online games—including electronic sports or e-sports—are growing exponentially, threatening the ecological balance of the cultural industry. In response to this phenomenon, efforts should be made to guide the rational allocation of core factors, enhance the social responsibilities of various cultural market players, and optimize the policy supply system to promote the balanced and healthy development of the cultural industry.

The strutural imbalance of cultural industries and the mismatching of elements are the root causes of its value disorder. The concentration of capital, talent, technology, and other core resources in the game industry has already produced a “lemming effect” on the traditional cultural industry and its market players, weakening the realistic basis of mainstream value promotion. In short, the overinflated development of the game industry is mainly reflected in the following three aspects.

High market concentration

First, the game industry’s market concentration is extremely high, so small and medium-sized companies find it hard to achieve high-quality innovation. At present, the game industry as a whole exhibits a “two super” pattern, where the largest game company accounts for nearly 60% of the domestic market share, nearly three times that of the second. However, head game enterprises’ profit models increasingly form an inhibitory effect on the game industry’s innovation capacity and even the entire cultural industry. The reasons are threefold. Capital operation inhibits independent innovation of small and medium-sized game enterprises. In the past two years, investments made by the leading game enterprises have risen sharply, and so have their influence and control over small and medium-sized game enterprises, which has a negative impact on the market environment reducing fair competition in the sector. 

The “in-app purchase” model that features a “pay to play” business practice inhibits the incentive to develop high-quality original games. The “in-app purchase” or “microtransaction” profit model mainly depends on the consumption of cue cards, fashion outfits, skins, and combat power in the game settings. Teenagers and female players are the most willing to pay. In particular, primary school students account for a high proportion of players for many popular online games. Under the “double reduction” policy, some imported games entered the market using false pretenses of advertising “game programming classes” to lure teenagers into game addiction. The downside of the “microtransaction” model is that it is more addictive than a premium AAA game, while it also reduces the motivation to develop high-quality original games. Moreover, after the cultural industry went through “pan-entertainment” rectification, a certain head game enterprise implanted the “fan economy” model from the entertainment industry to e-sports team/player games, forming a more circular, and more extractive, model. 

The trendsetting impact of the game industry on the traditional cultural industry is increasingly evident. Head game enterprises, backed by platform resources, have what it takes to lead the development of the whole cultural industry. It is worth noting that deepening integration of the game industry with other segmented industries has quietly changed the underlying logic and development forms of the traditional cultural industry. For example, leading game enterprises, riding on their capital and technological advantages, actively carry out project cooperation with cultural relic units, and implant game elements and even game IPs in the process of cultural “double creation.” As the gamification of classic culture becomes more and more common, the risk of gamification’s narrative overstepping the spiritual core of Chinese culture also increases accordingly. It must be pointed out that cultural digitization is not equivalent to cultural gamification, and not all spiritual and cultural contents are suitable for transformation into game products.

Structural imbalance

Second, the competitive nature of online games intensifies structural imbalance and disordered values in the cultural industry. Since 2018, under the iron fist of video game licensing and anti-addiction measures, regulation of the game industry has seen remarkable results. However, in order to find legitimate value in the expansion of the game industry, capital-backed entities continue to promote the transformation of online games into e-sports. In the 2022 Asian Games in Hangzhou, online games became one of the official events. 

Over the past two years, the e-sports industry has blossomed and become an “advantage” industry which stimulates local economic development. Some provinces and cities are also fiercely competing for the title of “the capital of e-sports.” Top game enterprises have become hugely popular across China, and have obtained a number of policy supports such as tax advantages, entry and exit permits, event approval, access to talent, capital, and external communication, constantly attracting core resources and elements to concentrate on the game and e-sports industry. In April 2022, the approval of licenses for new game titles resumed and supporting policies have been subsequently introduced. The game industry has started a new round of rapid growth, and its “bloated” development has exacerbated the risk of structural imbalance in the cultural industry.

‘Meta-universe’ 

Third, the government, enterprises, and schools are jointly pursuing the “meta-universe,” posing challenges to the construction of the national cultural big data system. Since 2022, the concept of a “meta-universe” began to gain traction in the game industry and in academia. Not only has a positive acceptance of this concept become mainstream, but also many governments have included it in their local versions of the 14th Five-Year Plan (2021-2025). It must be pointed out that the “meta-universe” is not a unified digital technology concept, but a kind of “capital logic” and business model based on the game industry reconstructing the next generation of the internet. 

Today, most state-owned cultural enterprises do not follow the trend of hyping up the “meta-universe,” but actively promote the construction of digital technology enabling cultural “new infrastructure,” especially the construction of a national cultural big data system based on the national cable television network and strive to make breakthroughs in the ingenious and innovative interpretation of excellent traditional Chinese culture. In doing so, they intend to bridge the gap between urban and rural areas, regions, types of business, categories, and enterprises through digitalization, and promote a more reasonable structure and allocation of elements for the cultural industry. However, the construction of a national cultural big data system faces multiple difficulties and challenges due to departmentalism and capital market speculation.

Cultural industry seeks balance

High-quality development of the cultural industry relies heavily on human development. This translates into creating a cultural environment conducive to physical and mental health, self-confidence, and self-improvement for young people. We cannot unilaterally pursue economic benefits while allowing “game economics” to take over the mainstream cultural industry. That said, improvement of policy tools and the government’s predictive ability are required, coupled with adjusting and optimizing cultural industry’s regional and industrial structure, so as to reshape the order of the cultural market and fill the market with high-value cultural products.

At present, policies for promoting the high-quality development of cultural industry are in excess supply but lack balance. In particular, policies from different sectors and regions lack consistency and coordination, and there is a “zero-sum game” among policies, making it hard to form synergy. According to statistics, from 2016 to 2021, more than 140 policy documents related to supporting the development of the e-sports industry were issued intensively, among which more than 90% were local comprehensive documents and special documents. This was not only an unprecedented quantity, but also produced great tension with the central government’s cultural industry planning. Overall, the policies feature “strong support, light control,” and “focus on individual enterprises, not the whole industry,” which intensifies the homogenization of cultural industry  competition, resource waste, and the mismatch of key elements. In the end, it is not conducive to the balanced and comprehensive development of our urban and rural cultural industries. Therefore, it is urgent to improve consistency, coordination, and balance between supporting and regulatory policies.

Second, though top video game companies have been subjected to anti-monopoly administrative penalties, several times, their high concentration in the cultural market prevails, restricts competition, and harms consumers’ interests. From the “fan economy” and “in-app purchases” to “fan microtransactions,” it can be seen that the business models of leading game enterprises are likely to abuse their dominant market position to induce irrational consumption by teenagers, which not only restricts the creative spark of high-quality innovation in the cultural industry, but also increases the cost burden for national finance to guide and reshape the cultural market order. 

At present, it is crucial to improve governance’s predictive capacity and macro-control, optimize the top-level design of the regional and industrial structure of cultural resources, and guide the optimal allocation of cultural elements. It is necessary to promptly investigate, analyze, and forecast the development trends of new business forms in the cultural industry, striving for “ex-post regulation” to “pre-event management.” On top of a comprehensive regulatory policy system, the government should take the initiative to build a unified national market, regulate capital, and clarify the directions and boundaries for market entities.

Finally, the cultural industry has both ideological and market attributes, between which the former should take precedence. The development of the Chinese cultural industry must take socialist core values as the fundamental guidance, and it should always remain cautious of the intervention of capital into cultural production. To meet the people’s diversified, multi-leveled, and multifaceted intellectual and cultural needs, we must improve the value content of cultural products. China has more than 60,000 forms of intangible cultural heritage, most of which are in rural areas. Many rural artisans can become specialists in excellent cultural production. We should give full play to the driving role of China Culture Industry Investment Fund, steer capital and enterprises to focus on the countryside, mobilize the enthusiasm and creativity of farmers, explore the spiritual treasure of our agricultural civilization, and replace low-value games and entertainment products with a steady stream of excellent Chinese cultural products.

Pan Na is an associate research fellow at the Institute of Contemporary China Studies at the Chinese Academy of Social Sciences. 

Edited by YANG XUE