China Reins In Net Cafes

To avoid regulators, internet cafe operators in China are going upscale with more luxurious and spacious locations.

To avoid regulators, internet cafe operators in China are going upscale with more luxurious and spacious locations.

DEC. 9, 2015 • The Ministry of Culture in China is cracking down on internet cafes, known there as Wang Ba (网吧). Specifically, the regulator is going after those establishments that illegally serve customers under the age of 18. The initiative is set to continue through January and mainly is targeted at rural districts that are more likely to flout the rules than in the major cities. In addition to curtailing access to internet cafes by minors, the ministry is also concerned with making sure owners provide clean and open conditions. In 2014, the Ministry of Culture revoked the licenses of 2,000 internet cafes during 2014, but estimates that 14,000 of the 156,000 total locations are operated illegally.

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Impact: Internet cafes in emerging markets have developed a reputation of being crowded full of chain-smoking gamers who can spend days playing online titles. This stereotype has been very accurate in China where home ownership of powerful PCs has only recently become widespread. But after a series of very public examples of game addiction, authorities there are emulating the South Koreans and installing legal restraints on how long youngsters can play, as well as turning a critical eye toward operators of internet cafes who are drawing the ire of parents. Public campaigns such as this can be difficult to face for service retailers but the response by the industry has been interesting. Owners in more prosperous cities along the coast are going upscale. Rather than cater to the masses, they are becoming more discriminating to attract older clientele with more disposable income. Prices are rising from about 5 yuan ($.75) an hour to close to 20 yuan ($3). The number of stations on site are going down to add some elbow room, the computer equipment is becoming more powerful, much more attention is being paid to interior decoration and owners are providing more add-on services. One of those new services drawing a great deal of attention in recent months is making attractive women with competitive game skills available to play online with internet cafe patrons for a fee. Some of the larger internet cafe chains are even providing their own chat apps for patrons to browse listings of women college students and office workers available to play. Rates can vary between 20 and 100 yuan ($15) per hour. The women set their own prices with higher rates going to those with better playing and communication skills. For more money, a patron can be taught how to play a new online game via video chat. This is not how we envisioned encouraging more women game consumers, but this is another example of how different markets respond to unique conditions.