The online game industry in Vietnam is understood as distribution of foreign games, mostly Chinese. Only a few games are developed by Vietnamese.
Vietnamese firms buy games for thousands to millions of dollars to distribute domestically. A deal is considered a success if it can bring profit of 2-5 percent, after deducting expenses. If it fails, businesses incur a loss of several billion to tens of billions of VND.
The majority of domestic game distributors said success means making a profit from 3 or 4 games out of every 10 games it distributes.
However, distributing games is no longer a source of revenue for Vietnamese game firms, as the payment method is no longer a barrier to game firms since e-wallets are available on app stores.
Chinese game firms distribute games across borders (illegally) into the domestic market instead of selling games to Vietnamese firms for domestic consumption.
La Xuan Thang, distribution director of VNGGames, said in recent years, the firms that buy foreign games for domestic distribution have been coping with difficulties in recent years.
For big games, Chinese products choose to distribute across borders. As for games with potential, game distribution companies in the host country buy the games and also distribute across borders.
Some Chinese game production companies come to Vietnam to set up companies and then distribute games in the Vietnamese market. As a result, the number of Vietnamese game firms has dropped dramatically.
A senior executive from SohaGame said it is difficult to buy games now, and the number of games distributed is on the decrease.
In the case of SohaGame, for example, the number of games distributed is even lower than in the years affected by Covid-19, and there has been no new game over the past four months.
Chinese companies prioritize channel distribution, which means they only need a company in Vietnam in charge of administrative procedures to obtain licenses, and they distribute the games themselves. In some cases, they set up companies that act as a ‘screen’ in Vietnam for their distribution activities.
With the ‘screen company’, money doesn’t flow through Vietnam, even though they obtained licenses from Vietnam, but goes directly to accounts on app stores of Chinese companies.
And they won’t have to pay tax. App stores have convenient payment solutions, such as payments via SMS, e-wallets and credit cards, and don’t need payment through domestic channels.
According to a representative from SohaGame, many domestic game distributors have left the market.
CEO of VTC Intecom Tran Phuong Huy confirmed that most game distributors are incurring losses. For a game distributed via mobile phones, if there are 100 gamers today and 25 gamers tomorrow, this would be seen as a success. However, it is difficult to do this in current conditions. Meanwhile, it has become too easy for foreign companies to distribute games illegally.
‘Luxury tax worry’ lifted
While game firms were struggling hard to exist, they have been dealt with another blow. The Ministry of Finance (MOF) proposed imposing a luxury tax on online games.
The Ministry of Information and Communications (MIC) many times asked MOF not to tax the type of business. The Authority of Broadcasting and Electronic Information (ABEI) continuously sent dispatches to the Legal Department of the Government Office and the Tax Policy Department of MOF, asking to temporarily exclude online games from the list of products and services subject to luxury tax when compiling the Law on Special Consumption Tax.
In the latest event, the Standing Government has decided that in the immediate future, online games won’t be subject to luxury tax. Finally, games firms now can sigh with relief as the tax burden has been lifted. However, they still need support as they have become too tired.