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China Mills Huge Fees for Social Network Games

China is well-known for its extraordinary Internet censorship and content filtering regime, designed to control information coming into China from other countries. But China’s government also has a heavy hand in regulating Internet businesses that operate solely within China. The latest example? The Chinese government is considering requiring social network games to receive approval from the Ministry of Culture, a publishing license from the General Administration of Press and Publication, and provide proof that the games do not infringe on intellectual property rights or copyrights. The cost of this approval and licensing process would total almost $1.5 million per game—a cost that would put most social networking game developers out of business.

Social network games have achieved huge popularity in China, just as they have in other parts of the world, with China’s Internet Network Information Center estimating some 92 million Chinese Internet users played social network games during April 2010. However, the Chinese government is concerned that many of the games include content prohibited under Chinese law, including violent acts and imagery as well as pornographic images. The regulations are apparently intended to ensure that social network games available to China’s citizens are in keeping with China’s mandates on Internet content.

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However, the fees and complicated process involved in getting an social game approved under the planned new regulations will undoubtedly put many game developers out of business, since many do not have the capital to participate in the regulatory process. The result might be many games shutting down, or shifting their games out of the Chinese market to less-regulated regions.

Chinese game developers are hoping the government adopts different standards and levels of regulations that vary with a game’s size and revenue, so smaller games with comparatively few players can still enter the market.

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