Customers play the Minecraft video game during the opening of the first Microsoft store in New York, U.S., on Monday, Oct. 26, 2015.
Photograph by Stephanie Keith — Bloomberg Finance LP

A case study in the hurdles faced by even the biggest Western companies.

By David Z. Morris
May 22, 2016

Chinese software publisher NetEase announced Friday that it has reached a five-year agreement with Microsoft to publish mobile and PC editions of the game Minecraft in China. But behind that announcement is a bigger story about the challenges of doing business in that country.

Minecraft is a ‘sandbox’ game that lets players build castles and dungeons from simple blocks, and it’s arguably the world’s most popular video game, with well over 70 million copies sold. Microsoft paid $2.5 billion for Minecraft developer Mojang in 2014, and has since helped the game reach multiple new regions and platforms.

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As Ars Technica explains, the lag between that acquisition and Minecraft’s official arrival in one of the world’s biggest markets was down to the complex, and often unfavorable, trade regulations that face Western gaming companies in China.

Publishing a game in China requires at least six permits, Ars reports, most of which are only issued to local Chinese companies. That means even multinationals with significant local presences, such as Microsoft, must partner with a Chinese publisher to release a game. (Or, as a former PopCap executive cited by Ars suggested, have a staffer marry a local who would then open a domestic entity).

The same local-partner restrictions apply across many industries. In gaming, NetEase, along with Tencent, is at the top of the list of local partners. NetEase’s other projects include Chinese distribution of Blizzard games including World of Warcraft.

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Now that it has successfully navigated the hurdles of permitting and partnering, Microsoft msft still has to worry about two things. Even officially-released games that raise the ire of the Chinese government for one reason or another have become the target of harsh regulation and smear campaigns in state media.

And China continues to have lax enforcement against counterfeiting and knockoffs, with software particularly vulnerable. Local partners themselves are sometimes the culprits—though NetEase has not been implicated in such practices.

Microsoft and NetEase have not yet announced Minecraft’s Chinese release date.

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