Tencent wins key approval to sell Nintendo's Switch in China

By Pei Li and Sam Nussey
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FILE PHOTO: A Tencent sign is seen during the fourth World Internet Conference in Wuzhen

FILE PHOTO: A Tencent sign is seen during the fourth World Internet Conference in Wuzhen, Zhejiang province, China, Dec. 4, 2017. REUTERS/Aly Song

By Pei Li and Sam Nussey

BEIJING/TOKYO (Reuters) - China's Tencent has won a key approval to start selling the Nintendo Switch in the country, paving the way for the console to enter the world's largest video games market two years after it was first released worldwide.

Authorities in the southern Chinese province of Guangdong gave the green light on Thursday to Tencent Holdings to distribute the Nintendo Switch console with a test version of the "New Super Mario Bros. U Deluxe" game, a statement on the government's website showed.

The need to navigate complex regulations and the search for a local partner have hampered Japanese gaming company Nintendo's efforts to bring its hybrid home-portable Switch console to China, holding back the development of console gaming there.

"Launching the Nintendo Switch in China is a massive opportunity for both Nintendo and Tencent," said Gu Tianyi, market analyst with gaming industry analytics firm Newzoo, adding that other consoles, PlayStation and Xbox, have struggled to catch on in China.

"What sets Nintendo apart, however, it that its intellectual property roster - including Mario, Zelda, and Pokemon - is already extremely popular in the market. What's more, the mobile aspect of the Switch is a great fit for China's mobile-first culture."

Tencent has traditionally had to apply for approvals from authorities in Guangdong, where the company is registered. Two people familiar with the matter said the approval by the Guangdong culture ministry would allow the Switch to be sold nationwide.

Tencent did not immediately respond to requests for comment.

It has teamed up with Nintendo in the past, with Tencent releasing its Arena of Valor game overseas on the Switch.

A spokesman for Nintendo - which has sold more than 32 million Switch units globally since its launch just over two years ago - said Tencent had applied to Guangdong authorities for approval to sell the Switch console.

GAME APPROVALS

Approving games and consoles for sale in China is a multi-layered process. The country's Ministry of Culture and Tourism has oversight over game hardware, while games need to be approved by China's State Administration of Press and Publication.

The statement, posted on the website of the Guangdong Provincial Department of Culture and Tourism, listed over a hundred game devices, including arcade machines, that it was approving for sale.

It said the Nintendo Switch would need to be sold with a test version of the New Super Mario Bros. U Deluxe game. Test versions are generally distributed for free and thus do not need licenses.

The approval also comes as industry leader Tencent tries to recover from a lengthy video game approval freeze in China last year, which has put pressure on shares of the company and other gaming-related stocks.

The regulator has started to give the green light to games again but sources have told Reuters that it faces a big backlog.

Nintendo has previously released gaming devices like the N64 and the 3DS XL in China under iQue branding.

(Additional Reporting by Beijing Monitoring Desk; Writing by Brenda Goh; Editing by Himani Sarkar and Susan Fenton)