Sony, Nintendo Stock Rises As China May Lift Ban On Video Game Consoles

Japanese markets surge on news of possible access to massive untapped market.

 @YannickLeJacq
on January 28 2013 12:16 PM

Shares of prominent video game console manufacturers like Sony (NYSE: SNE) and Nintendo (PINK: NTDOY) surged on Monday, following a report from the state-run Chinese newspaper China Daily saying Ministry of Culture officials are reconsidering a 12-year ban on the sale of video game consoles.

Video game technology was originally prohibited in China in 2000 due to concerns that the gameplay would have adverse effects on the physical and mental development of the country’s youth. Despite the ban of game-specific hardware such as Sony’s Playstation 3 or Nintendo’s Wii console, countless Chinese citizens play games through Web browsers or mobile devices like smartphones. But an actual overturning of the current ban on gaming consoles could still be tricky since all seven of the ministries that originally issued the ban would need to approve its rescindment, China Daily’s sources said.

"We are reviewing the policy and have conducted some surveys and held discussions with other ministries on the possibility of opening up the game console market," an official from the Ministry of Culture told the Chinese newspaper. "However, since the ban was issued by seven ministries more than a decade ago, we will need approval from all parties to lift it."

An official at the ministry originally responsible for the legislation denied the report, simply telling Reuters: "The ministry is not considering lifting the ban.”

Access to the vast Chinese market represents incredible promise for the video game industry, which is currently struggling with falling sales of aging current-generation console hardware. As the world's most populated country, ending any prohibition gives a consumer electronics company the chance to sell its wares to more than 1 billion new potential customers. 

But the financial reality may be less cut and dry. Japanese developers are no doubt eager to find new room for growth, given the fact that they've ceded an increasing amount of the game industry's global market share to Western developers over the same decade-plus period that game consoles have been outlawed in China. But simply having more potential customers doesn't guarantee that a new Chinese audience won't go the way of American and European audiences and favor Xbox 360 over its Japanese rivals. Black market gaming devices are already available in China, and Sony still faces the same dilemma it always has. 

A spokesperson for Sony's games unit told Bloomberg that the Japanese gaming giant "has always regarded China as a promising market for the game operation and has been studying and preparing for possible business opportunities," adding that the company has been in "constructive discussions" with Chinese regulators in recent months.

Stock in the big three console developers -- Sony, Microsoft (Nasdaq: MSFT) and Nintendo -- rose almost immediately after the fresh round of rumors began to circulate. Sony rose 9.1 percent in Tokyo trading to ¥1,407 yen ($15.51 per share), its highest price point since April 2012. Nintendo, meanwhile, jumped 3.4 percent in Osaka trading to ¥9,630 yen, its highest point since Dec. 7, 2012. Microsoft shares moved more slowly than its Japanese rivals on Monday, jumping three quarters of a percentage point to $28.10 in early morning trading.

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