(Repost) Bloomberg -- Tencent Sheds $54 Billion as China Unveils Latest Gaming Curbs

(Credit: Transcript by OpenAI Whisper)

Tencent sheds $54 billion as China unveils latest gaming curves. China unveiled a raft of new measures to rein in spending and content in online games, signaling the start of another industry crackdown that wiped out roughly $54 billion of Tencent Holdings Limited's value. Beijing's top gaming regulator on Friday published draft rules broadly designed to clamp down on practices that encourage players to spend more money and time online. Among other things, they include a ban on rewards for frequent logins, forced player duels and a vague prohibition on any content deemed to violate state secrets. The sweeping restrictions, which likely surprised industry players and investors, suggest Beijing is getting ready to launch another crackdown on the world's largest mobile gaming arena. Tencent slid as much as 16 percent, its biggest intraday fall since 2008, while smaller rival NetEase Inc. dived 28 percent. The Nexen Company, which derives a chunk of its revenue from China, fell 8 percent. Bilibili Inc., a social media service popular with gamers, fell 6.1 percent. Xi Jinping's administration has sought to combat gaming addiction, blaming online entertainment for the rise of myopia among youths. Critics have also linked its rise to various ills from unemployment to low birth rates. At the height of the tech sector crackdown, the government froze approvals for new titles and launched several investigations into content, forcing developers including Tencent to modify certain games. This will deal a blow to the overwhelming majority of games in China, except those that sell copies. Companies will need to overhaul their monetization models, including how they charge money from different tiers of players, said Zheng Zhoufeng, a vice president at Nikko Partners. Read more, Xi remade China's tech industry in his own image with crackdown. The latest rules emerged after Beijing in 2023 appeared to thaw on the sector. Officials in past months had encouraged esports for instance as an engine for the post-COVID economy. Xi himself attended the opening ceremony of the 19th Asian Games in Hangzhou, which featured professional gaming among the medals up for grabs for the first time. In December 2022, Tencent secured a green light for a clutch of major releases including Valorant and Pokemon Unite, a milestone that reinforced hopes China was easing its two-year crackdown on big tech. The WeChat operator is now locked in a fierce battle with net ease as it rolls out casual title Dreamstar in hopes of replenishing an aging gaming portfolio. Both companies have poured advertising and other promotional costs into the so-called party royale genre, at a level unseen in recent years. China's gaming market was set to grow almost 14% to 302.9 billion yuan, $42.4 billion, in 2023, reversing a 10% decline from the year before, according to data provider CNG. To compete more, ByteDance's sales break $110 billion to pass Tencent in 2023. Yet the Communist Party since 2020 has waged a campaign against a private sector it regarded as amassing more power and expanding recklessly, an effort that managed to reign in once dominant tech sector leaders such as Jack Ma's Ant Group company and Alibaba Group holding limited the crackdown on gaming actually predated that movement, with the first suspensions of game approvals starting around 2018. The government now wants to set a cap on how much money each player can spend within a title, according to the draft. The regulations also ask that game publishers operating abroad respect Chinese laws and culture and refrain from endangering national security, without elaborating. Tencent is the world's largest gaming publisher, with investments in studios from Epic Games Inc. in the US to Supercell in Europe. The agency will take feedback on the proposed rules for a month, without saying when they take effect. It's hard to quantify the impact at this stage but the draft rules raises concerns over the gaming company's monetization prospects, said Daisy Li, a fund manager at EFG Asset Management HK Ltd. With the rules, gaming players' behavior could change and the company's daily active users could take a hit. Read more, China hosts biggest e-sports moment with Tencent at the wheel.


Key Takeaways:

  1. China's new measures aim to control online gaming spending and content, impacting industry giants like Tencent Holdings Limited and causing a significant drop in their market value.
  2. The draft rules include bans on certain gaming practices and content, reflecting Beijing's intent to intensify regulatory oversight in the gaming sector.
  3. These developments suggest a revival of stringent tech sector regulation, affecting various companies and potentially reshaping monetization models in China's gaming industry.

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