China will tighten video game restrictions

New regulations are about to be implemented in China that will restrict the amount of money and time that individuals are allowed to spend on video games.

The limits are designed to restrict the amount of money that may be spent within the game and to discourage compulsive gaming behavior.

The proposed regulation is a blow to the largest online gaming business in the world, which is still in the process of rebounding from a previous crackdown.

The information caused the stock prices of major technology companies to plummet and reduced their value 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 going to be reaffirmed as part of the proposed restrictions.

For the first time, Beijing took action against the gaming industry in 2021, when it issued a regulation that internet gamers under the age of 18 would be restricted to playing for a maximum of one hour on Fridays, weekends, and holidays.

Nevertheless, the most recent set of limitations goes much further.

The National Press and Publication Administration (NPPA), which is the regulatory body for the online gaming sector, has said that online games must not provide awards that encourage players to play and spend an excessive amount of money. These rewards included rewards for daily logins and for topping up accounts with more dollars.

“The removal of these rewards is likely to reduce active users on a daily basis and in-app revenue, and it could eventually force publishers to fundamentally overhaul their game design and monetization strategies,” said Ivan Su, a Morningstar analyst at the business. “In addition, the removal of these rewards could eventually push publishers to rethink their game design.”

Additionally, pop-ups that warn players of “irrational” playing behavior are going to be implemented when the time comes.

Effect of knocking on

China is the largest gaming market in the world, and In terms of revenue, Tencent is the most successful company in the gaming industry worldwide. The business has a strong presence in the Asian market and has made investments in gaming studios located all around the world.

Tencent’s share price experienced a decline of 12.4% that followed the introduction of the NPPA.

Vigo Zhang, vice president of Tencent Games, stated that the company will adhere to any new regulatory standards in a stringent manner. According to him, the new draft guidelines have not deviated from the continuous priority of regulators on ensuring that businesses have “reasonable business models and operating cadence.”

He went on to say that since 2021, when Beijing began to place a greater emphasis on the safety of younger players, the amount of money and time that minors spend on Tencent’s games has been far lower than it has ever been.

There was a decline of about 24 percent in the share price of the competitor NetEase, which has not yet provided a statement on the suggestions.

Prosus, a Dutch technology investor, saw its share price drop by more than 14%. There is a strong correlation between the success of Prosus’s stock and that of Tencent, which is the company’s largest investment in a diverse portfolio of technology businesses.

It was felt across Hong Kong’s Hang Seng Index, which plunged more than 4% at one point and was down 1.7% by the time trade came to a close. The shockwaves were felt throughout the whole index.

Daniel Camilo, a gaming analyst, stated to the BBC that both Tencent and NetEase provide a large number of free-to-play games that are “pay to win” games. This means that players are “actively incentivized to spend money on their games.”

The limits might have an impact on such kinds of “monetization models,” which would then need to be reorganized. Additionally, “some of the games might have to be pulled out from the stores,” he warned.

Nevertheless, Mr. Camilo thought that either Tencent or NetEase would return to profitability in the long run. Nevertheless, the same cannot be said for gaming enterprises that are on a lesser scale.

“If a small company is affected in a few million, then it might mean that they have to close their doors,” added the economist.

Specifically for the gaming sector in China, the year 2023 has been a year that has been filled with layoffs and a great deal of difficulties. As a result, I would argue that this is a type of harsh hit, particularly for medium and smaller publications.

The new gaming regulations that the government is implementing would also have the ability to expedite the process of granting games the go-ahead in the nation by mandating that approvals be processed within sixty days.

Instead of hosting their servers in other countries, game companies would be required to house their servers in China, where they would process and store customer data.

Reports from Reuters indicate that the administration is requesting feedback from the general public on the plans by the 22nd of January.