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HomeNewsChina Has Announced New Measures to Limit Video Game Spending.

China Has Announced New Measures to Limit Video Game Spending.

A great step to a new direction (?)

The new laws, which effectively set spending limitations for online games, triggered investor fear, wiping out over $80 billion in market value from China’s two largest gaming businesses as investors assessed the possible impact on earnings and other restrictions in the works.

Online games will no longer be able to provide players incentives if they log in every day, spend money on the game for the first time, or spend money on the game numerous times in a row. All of these are frequent reward methods in online games.

Tencent Holdings (0700.HK), the world’s largest gaming firm, saw its shares fall as much as 16% at one time, while NetEase (9999.HK) saw its shares fall as much as 25% after the National Press and Publication Administrations announced the new draft rules.
Shares of tech investor Prosus (PRX.AS) fell 14.2% in early trade on Friday, joining Tencent as the biggest fallers on the pan-European stock index (.STOXX). Tencent is owned by Prosus to the tune of 26%.

“It’s not necessarily the regulation itself – it’s the policy risk that’s too high,” said Steven Leung, executive director of institutional sales at Hong Kong brokerage UOB Kay Hian. “People thought this kind of risk should have passed and began to look at fundamentals again.” It has a significant negative impact on confidence.”
When asked about the impact of the proposed guidelines, Tencent Games vice president Vigo Zhang stated that the company will not need to substantially change “its reasonable business model or operations” for games, noting that the company has been strictly implementing regulatory standards.

Minors have been spending historically low amounts of money and time on Tencent’s games since 2021, when Beijing made minor protection a priority.

NetEase did not respond to requests for comment.

Over the years, Beijing has gotten increasingly strict on video games. In 2021, China imposed severe playtime limits for children under the age of 18 and banned new video game approvals for around eight months, citing gaming addiction worries.
Despite the fact that the crackdown officially stopped last year with the restoration of new game approvals, regulators have continued to enforce limitations to limit “in-game” spending.

The new regulations announced on Friday are the most detailed ever in terms of limiting in-game spending. Aside from prohibiting reward elements, games must also limit how much players can top up their digital wallets for in-game purchases.

“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, an analyst at Morningstar, said.

Minors are also prohibited from being offered probability-based fortunate draw features in games, as well as the speculation and auction of virtual gaming objects.

However, the new guidelines contained a provision that the industry is largely expected to support: requiring regulators to process game approvals within 60 days.

Meanwhile, Chinese regulators issued licenses for 40 new imported games for domestic release on the same day, considered as a hint of Beijing’s willingness to allow additional games in the nation despite the proposed regulations on gaming expenditure.

The new regulations also reflect Beijing’s concerns about user data, requiring game companies to keep their servers in China.

The administration is accepting public comments on the rules until January 22, 2024.

As a result of Beijing’s crackdown on gambling in 2021, 2022 was the most challenging year on record for the Chinese gaming industry, with total revenue declining for the first time.

According to Industry group CGIGC, China’s video game sector returned to growth this year, with domestic revenue increasing 13% to 303 billion yuan ($42.6 billion).

The severe draft rule has also thrown a pall over gaming stocks around the world. Roblox (RBLX.N), Electronic Arts (EA.O), and Unity Software (U.N) all fell between 1.7% and 3.1% on Friday, while French video game company Ubisoft (UBIP.PA) fell more than 3%.

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