From the Golden Decade to the Cliff-like Decline: A History of the Rise and Fall of Internet Cafes in China

From the Golden Decade to the Cliff-like Decline: A History of the Rise and Fall of Internet Cafes in ChinaOnce upon a time, nothing was more lucrative than opening an internet cafe. A cafe costing 100,000 yuan could easily generate over a million yuan in annual revenue

From the Golden Decade to the Cliff-like Decline: A History of the Rise and Fall of Internet Cafes in China

Once upon a time, nothing was more lucrative than opening an internet cafe. A cafe costing 100,000 yuan could easily generate over a million yuan in annual revenue. However, since 2016, the number of internet cafes has plummeted from a peak of 152,000 to just 132,000 by June 2023, a decrease of approximately 20,000. In 2020 alone, over 12,800 internet cafe-related businesses went bankrupt. Why have internet cafes, once packed with customers, been abandoned by young people?

The Golden Decade of Internet Cafes: From Information Inquiry to Entertainment and Socialization

In the mid-1990s, with the introduction of the internet, China's internet industry developed rapidly. However, at that time, the exorbitant price of computers put them out of reach for many ordinary people. A computer capable of accessing the internet cost nearly 10,000 yuan, while most people's monthly salaries were only 400 or 500 yuan. Buying a computer meant saving two years' worth of salary without spending anything else.

In 1996, the first internet cafe in Shanghai, "Wiget," opened its doors. It primarily served local white-collar professionals and foreigners, charging a staggering 40 yuan per hour. Shortly after, Beijing's "Shihua Network Coffee House" opened, catering more to local needs and considered by many to be the first truly "local internet cafe" in China. Its primary service was providing information retrieval.

That same year, the first online game in mainland China, "Xia Ke Xing," was released, completely transforming the landscape of the internet cafe industry. This game attracted a large number of young people who enjoyed online gaming, turning internet cafes from mere information centers into popular hangouts for entertainment and socialization. The introduction of classic online games like "Legend" further fueled the popularity of internet cafes, ushering in a "golden decade" with a surge in the number of internet cafes across the country. The number of internet users crossed the 100-million mark, and internet cafe culture became widespread.

The rise of instant messaging software like Tencent QQ further solidified the role of internet cafes as social platforms. People at internet cafes not only enjoyed the fun of gaming but also met friends from all over the country in chat rooms, sharing their lives.

The 2002 "Blue Speed" Incident: Stricter Regulations for Internet Cafe Management

Just as the internet cafe industry was flourishing, it faced a major crisis. In the early hours of June 16, 2002, a horrific tragedy struck the "Blue Speed" internet cafe in Beijing. Four underage individuals, denied access to the internet, deliberately set fire to the cafe, resulting in 25 deaths and 12 injuries.

This heinous incident not only exposed the loopholes in internet cafe management but also sparked widespread concern about the issue of minors becoming addicted to the internet. To regulate the internet cafe industry, relevant authorities promptly issued the "Regulations on the Management of Internet Service Venues." From that point forward, internet cafe management entered a stricter and more regulated phase.

The implementation of these new regulations significantly raised the bar for setting up legal internet cafes. Some regions even experienced difficulties in obtaining legal business licenses, prompting some operators to switch to setting up covert "black internet cafes."

For a period, "black internet cafes" became the primary entertainment venues for many minors. Although the network environment and speed provided were far from those of legitimate internet cafes, they still attracted a large number of young people. These "black internet cafes" were often hidden in cramped and dark rental rooms, some even using billiard halls or restaurants as fronts.

Despite clear regulations prohibiting internet cafes from accepting minors, "black internet cafe" operators found ways to help minors evade inspection, perpetuating a "cat-and-mouse game" between the internet cafe industry and regulatory authorities.

The "Golden Age" of Internet Cafes: Speed is King, Wealth Follows

During that period, opening a small internet cafe with 50 computers in the city center required an investment of only 300,000 yuan. As a result, opening an internet cafe became a hot entrepreneurial choice. Well-located internet cafes had average daily online hours exceeding 20, with internet fees ranging from 3 to 5 yuan per hour. This resulted in daily revenue easily surpassing 3,000 yuan. At this rate, an internet cafe could recoup its investment within half a year and generate tens of thousands of yuan in profit.

For internet cafe operators at the time, network speed was the key competitive advantage. Guaranteeing the fastest internet speeds attracted a large number of customers, truly realizing the entrepreneurial myth of "speed is king, wealth follows."

2003 to 2016: The Prosperity of Online Games Drives Internet Cafe Development

Between 2003 and 2016, China's online gaming industry entered an unprecedented period of "golden prosperity." During this time, giants like Tencent led the way in innovation, launching diverse platforms such as QQ Game Hall, QQ Space, and Tencent Weibo, significantly enriching users' online entertainment experiences. At the same time, popular online games like "" (), "" (), and "" () emerged like mushrooms after a rain, fully satisfying players' gaming needs.

In 2011, with the phenomenal emergence of "League of Legends," the internet cafe industry experienced another wave of transformation and competition. Internet cafes across the country upgraded their hardware to attract more players.

According to the "2015-2016 China Internet Cafe Industry Big Data Report Blue Book," internet fees exceeded even catering expenses in user expenditure, becoming the top expenditure item. Additionally, the number of internet service venues nationwide showed steady growth, increasing from 146,000 in 2015 to 152,000 in 2016.

2016: The Cliff-like Decline of Internet Cafes

However, the good fortune of internet cafes came to an abrupt end in 2016. With the widespread adoption of smartphones and mobile internet, the entertainment options for young people were no longer limited to traditional internet cafes.

The rise of new forms of entertainment, including escape rooms, script killing, social media, and various mobile games, greatly diversified people's leisure activities, significantly reducing the appeal of internet cafes as a singular entertainment destination.

Compared to the immediate gratification and ease of operation of mobile games, PC games often appeared more complex and time-consuming. For modern young people seeking fast-paced, fragmented entertainment, the high barriers to entry and depth of gameplay in PC games became a burden.

The rapid of mobile games owes to their unparalleled convenience, instant entertainment, and low barriers to entry, collectively attracting a large number of users with enthusiastic support and enjoyment.

The prevalence of mobile games gradually fostered new user habits, leading to a diversion of the PC game player base, naturally impacting internet cafes as the primary consumption venues for PC games.

Moreover, to strengthen the regulation of the gaming market, authorities temporarily suspended the approval of game licenses, inflicting a significant blow on the entire gaming industry, including the PC game market. The impediment to the launch of new games directly affected the content updates and appeal of internet cafes, making it difficult to attract customers back.

On another front, continuous advancements in gaming technology have led to increasingly demanding hardware requirements for client-side games. To maintain game smoothness and visual quality, internet cafes needed to continuously invest in upgrading hardware and software systems. This constant capital expenditure was burdensome for many internet cafes, especially in the face of declining customer numbers and profitability.

Furthermore, the noisy environment, air quality issues, etc., in internet cafes inadvertently affected user experience, further exacerbating customer churn.

2020: The Pandemic Accelerates the Decline of Internet Cafes

The cliff-like decline of the internet cafe industry became apparent in 2020. That year, the pandemic struck, forcing internet cafes nationwide to close indefinitely, plunging the industry into a sudden winter.

According to Tianyancha, in 2020, a total of 9,250 businesses closely related to internet cafe operations were deregistered nationwide, while the actual number of closed internet cafes exceeded 12,888. These figures reflect the internet cafe industry's difficult struggle and reshuffling amidst the pandemic, marking a watershed moment in the industry's transition from prosperity to decline, facing a survival crisis.

However, the pandemic may have only accelerated the decline of internet cafes. The underlying reason is the changing times and evolving consumer needs.

Transformation and Upgrade: From Internet Cafes to E-Sports Hotels

Consequently, traditional internet cafes embarked on a path of transformation.

Internet cafes, as the pioneers of internet cafe transformation, retained their original internet access functionality while implementing comprehensive improvements in their environment, services, and facilities. High-end computer configurations, smooth internet speeds, comfortable seating, sophisticated lighting and sound systems, and accompanying cafes, mobile game zones, board game zones, etc., collectively created a high-quality space that blends leisure and entertainment.

The sweeping influence

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