China is going to implement new regulations restricting the amount of money and time individuals may spend playing video games.
The limitations are intended to reduce in-game purchases and stop compulsive gameplay.
The world’s largest online gaming market, which is still getting over a previous crackdown, is dealt a blow by the draft legislation.
The news caused the value of internet titans’ shares to plummet by tens of billions of dollars.
A prohibition on “forbidden online game content that endangers national unity” and “endangers national security or harms national reputation and interests” is also reiterated by the intended limitations.
In 2021, Beijing took the first step against the gaming industry when it decided that, on Fridays, weekends, and holidays, internet gamers under the age of eighteen could only play for one hour.
However, the most recent round of limitations goes beyond.
According to the industry regulator, the National Press and Publication Administration (NPPA), incentives for daily logins and top-ups with extra money are among the things that online games should not offer.
“The removal of these incentives is likely to reduce daily active users and in-app revenue, and could eventually force publishers to fundamentally overhaul their game design and monetisation strategies,” Ivan Su, a Morningstar analyst, said.
Additionally, pop-ups alerting users to “irrational” gaming behavior are scheduled to activate.
Effect of knock-on
The greatest gaming market in the world is in China, and Tencent leads the industry globally in terms of earnings. The business is market leaders in Asia and has made investments in global game developers.
Tencent had a 12.4% decline in share price after the NPPA announcement.
Vigo Zhang, vice president of Tencent Games, promised that the company would closely adhere to any new laws. According to him, regulators’ continued emphasis on making sure businesses have “reasonable business models and operating cadence” has not changed with the new proposed guidelines.
Additionally, pop-ups alerting users to “irrational” gaming behavior are scheduled to activate.
Effect of knock-on
The greatest gaming market in the world is in China, and Tencent leads the industry globally in terms of earnings. The business is market leaders in Asia and has made investments in global game developers.
Tencent had a 12.4% decline in share price after the NPPA announcement.
Vigo Zhang, vice president of Tencent Games, promised that the company would closely adhere to any new laws. According to him, regulators’ continued emphasis on making sure businesses have “reasonable business models and operating cadence” has not changed with the new proposed guidelines.
Tencent and NetEase both offer a large number of free-to-play “pay to win” games where players are “actively incentivised to spend money on their games,” according to gaming consultant Daniel Camilo, who spoke with the BBC.
According to him, “some of the games might actually have to be pulled out of the stores” because of the limits that could impact such kinds of “monetisation models,” which would then need to be reformed.
On the other hand, Mr. Camilo believed that Tencent and NetEase would eventually bounce back. That being said, smaller gaming companies cannot make the same claim.
“If a small company is affected in a few millions, then it might mean that they have to close their doors,” he stated.
“The year 2023 has been filled with layoffs and hardships, especially for the Chinese gaming industry. Thus, I would say that this is somewhat of a serious blow, particularly for the medium and smaller publishers.”
The government’s new gaming regulations, which mandate that regulators approve applications within 60 days, may also expedite the approval process for games across the nation.
Instead of locating their servers overseas, game companies would have to locate them in China to process and store user data.
Reuters reports that the administration wants feedback on the plans from the general public by January 22.
