If limiting the gaming hours for minors is too much, you probably haven't heard China's new rules about it.
Chinese regulators released a new set of rules that aligns to its mission to curb gaming. This time, the move will restrict in-game spending for all players.
This is seen to be a big blow to the video game publishers who are raking millions of revenues per year.
China Curbs In-Game Spending For Online Games
As reported earlier by Reuters, Beijing will set a limit for spending as part of the new regulation. From what we have seen here, investors who back up gaming giants like Tencent will be impacted by the restrictions.
Some games have daily rewards which force some players to log in every day. However, that will not happen anymore since the games won't be allowed to roll out the feature. Players will have an adjustment for this change especially those who buy in-game cosmetics or items consecutively.
Tencent's shares plummeted up to 16%, while NetEase saw a staggering 25% decline, resulting in a collective loss of nearly $80 billion in market value, according to Bloomberg.
Key Regulatory Changes
The new rules introduce stringent measures, including:
Daily Login and Spending Rewards: Online games are prohibited from offering rewards for daily logins or initial spending, challenging common incentive practices.
Investor Panic: The announcement prompted a wave of panic among investors, reflecting concerns about potential earnings impacts and the anticipation of further restrictions.
Tech Investor Fallout: Tencent's woes extended to tech investor Prosus, which owns a substantial stake in Tencent. Prosus shares slumped 14.2% in early trade, highlighting the ripple effect of the regulatory shock.
Response from Gaming Giants
Tencent Games' Vice President, Vigo Zhang, asserted that the company would not need a fundamental overhaul of its business model. Zhang emphasized Tencent's adherence to regulatory requirements and highlighted the historically low spending by minors on Tencent's games since 2021.
Beijing's Stringent Stance
Beijing's regulatory stance on video games has been progressively stringent. In 2021, strict playtime limits for under-18s were implemented, and new game approvals were suspended for eight months due to concerns about gaming addiction. The latest rules are the most explicit yet, specifically targeting in-game spending.
Industry Impact and Global Fallout
The proposed removal of incentives is expected to impact daily active users and in-app revenue, potentially necessitating a fundamental overhaul of game design and monetization strategies.
The draft rules also cast a shadow on gaming stocks globally, with companies like Roblox, Electronic Arts, Unity Software, and Ubisoft experiencing notable declines.
"It's not necessarily the regulation itself - it's the policy risk that's too high. People had thought this kind of risk should have been over and had started to look at fundamentals again. It hurts confidence a lot," Steven Leung, executive director of institutional sales at broker UOB Kay Hian in Hong Kong, said.
Positive Note for Game Approvals
Amid the regulatory storm, a potential positive for the industry emerges with a proposal requiring regulators to process game approvals within 60 days.
Simultaneously, licenses for 40 new imported games were announced, signaling a willingness to allow more games in the country.
Reflecting Beijing's data concerns, the new rules mandate game publishers to store their servers within China. This aligns with broader global trends of heightened scrutiny over user data management.
What is Waiting For the Whole Gaming Industry?
As the Chinese gaming industry remains shackled to the aftermath of regulatory turbulence, the proposed rules will be open for public comment until January 22, 2024.
Despite China's obsession with gaming, it only goes to show that the authorities are persevered to slowly eradicate gaming in the country.
