Last week, Newzoo issued its annual  Top 100 Countries By Game Revenues report, showing that for the first time China has surpassed the U.S. in gaming revenue. Taken all together, Asia Pacific contributed almost half (47.2 %) of the top 100 revenues in 2015, primarily in mobile and PC gaming. Unsurprisingly, China dominates the market with the #1 spot on the Top 100 list.

[a]listdaily speaks to Peter Warman, Co-Founder & CEO of Newzoo, to gain further insight on the report and the fast growing Asian markets.

According the Newzoo report, China took in about $22.2 billion in gaming revenue, which is $4.3 billion increase over last year’s report. How much of a role did lifting console ban play in this growth?

The lifting of the ban did not play a significant role in the year-on-year growth of 23.2% The fact that consoles are now officially available has not changed the situation that tens of millions of modified PCs are in use playing PlayStation and Xbox games that are hacked, localized and offered from websites.

Still, there are enough people that have the budget to spend on console hardware and software so there will be sales. At the same time, the drawback of only being able to play the legit games that are officially allowed by the Chinese government limits the mass potential. The growth is fueled by mobile gaming (+47% y-o-y jump in revenues).

For the first time, we see serious cannibalization of PC/MMO game revenues by mobile. Underlying revenue growth if of course a growing connected population and economic growth. Connectivity now stands at exactly 50 percent of the 1.4 billion population, with gamer numbers exceeding 500 million this year. We do see the growth in revenues slowing down to an average of 16.1% over the years 2014 2018. In 2018, we estimate the market to reach  $32.8 billion and annual growth rates to be around 10 percent

How much of China’s gaming revenue come from mobile games in comparison to consoles?

Mobile revenues take 29.4% of the total Chinese games market this year with $6.5 billion. We expect console game revenues to be slightly higher than $500 million  this year, or rather 2% of the total market.

China managed to push the United States into second place for the first time, despite how U.S. gaming revenues grew $1.4 billion from last year. What does this say about China as a growing market compared to the U.S.?

Well, with a population of 1.4 billion this was bound to happen, so it is definitely not a surprise. And the market is not easy to enter, so average spending in the U.S. will remain to be higher for many years to come ensuring the U.S. will remain the most attractive market for Western publishers for years to come.

Reuters recently published an article about how China’s slowing economic growth. Do you think video game revenues will also see a slowdown in the coming year, or that it will continue to grow substantially?

Does the struggling stock market have an effect on game revenues Indirectly, it may, but certainly not yet. History also shows for Western and Growth countries alike that a weaker economic period only has limited effect on game spending. The theory is that in an economic downturn, people have more time and spend a higher share of a smaller budget on average. In economic good times people have more money to spend. The slowing growth in game revenues is mainly due to slower growth in connected population and saturation of spending in the mature market.

Do you think that China’s stunning growth in gaming revenue will shift greater focus on Asian markets in general?

It already is ongoing. Every global player has an interest in China in some way. It can be as consumer market or as a country that provides new partnerships and investments. From a Newzoo perspective, our partnership with leading Chinese big data company TalkingData is crucial for us to be a true global player. We spoke at their corporate event in Beijing a couple weeks ago that attracted over 2,000 people giving us an unique entry into the market. This is in addition to having data on 800 million iOS and Android smart devices used every month that provides unique insights to Western companies with an interest in the Chinese mobile landscape. I expect there will be a lot more consolidation of Western and Chinese game companies over the coming years.

Besides China and other Top 10 ranking countries like Japan and S. Korea, which do you think are countries to keep a close eye on?

It is definitely Southeast Asia, so Singapore, Thailand, Vietnam, Philippines, Indonesia, Malaysia. Not only because of their explosive growth in mobile game revenues but also because these countries are proving to be easier to enter for Western games than China. On average half of the top grossing games are Western games in these countries versus 10-20% in China, depending on store. Moreover, many of these countries have a large English speaking share of the population putting less pressure on localization.

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