Electronic sports games (“E-sports games”) have been developing at an extremely high speed, forming a sports storm sweeping over the entire world.  With E-sports games gaining tremendous popularity in China, more and more foreign companies are aiming at the Chinese market.  However, upon entering China with enthusiasm, foreign enterprises are often paralyzed by Chinese regulations.

In China, E-sports games were formally recognized as the 99th sports event by the Chinese government.  Technically, E-sports games should be treated like any other professional sport.  However, authorities in China generally do not differentiate between E-sports games and common video games.  The same regulations are used to govern and control both.

The biggest obstacle for foreign companies to operate E-sports games in China is obtaining the necessary permits.  To operate E-sports games, one needs the following three permits:  (1) an increment telecommunication service management permit; (2) a Network Culture Business Permit; and (3) a Network Press Permit.

The Network Culture Business Permit is often the hardest to obtain.  According to the publication “Some Opinions of the Ministry of Culture and the Ministry of Information Industry on the Development and Administration of Net Games” issued by State Ministry of Culture and Ministry of Information Industry, “An operational entity of network culture that applies for engaging in the business of net games shall, besides meeting the relevant provisions, have a registered capital of more than 10, 000, 000 yuan   (USD $ 1,428, 571) .”  Further, The Ministry of Culture prohibits foreign-invested operational entities (including wholly owned or joint venture) from obtaining the Network Culture Business Permit.

A possible solution to these hurdles is a “creative” partnership with a domestic Chinese company that already has all three permits.  Of course, these creative partnerships are hidden with risks and challenges themselves.  Foreign enterprises running E-sports games in China must tread carefully and seek experienced counsel.

Authored by:

Sheppard Mullin’s Shanghai Office