In a recent move, China has announced plans to intensify its control over the video gaming industry, introducing stringent regulations that limit both time and monetary investment in gaming. This initiative aims to curb in-game purchases and mitigate obsessive gaming behaviour, especially among younger audiences. As the world’s largest online gaming market, China’s decision has significant implications for domestic players, global gaming giants and the industry.
The new draft legislation, seen as a harsh blow to an industry still reeling from a prior crackdown, has caused a ripple effect in the stock market. Major tech companies witnessed a sharp decline in shares, with billions of dollars in value evaporated overnight. This step, as outlined by the National Press and Publication Administration (NPPA), further reinforces the prohibition of content that could jeopardize national unity, security, or reputation.
The restrictions are more comprehensive than the 2021 regulations, which limited gaming time for minors. The focus is also on eliminating in-game rewards that promote excessive play and spending, including daily logins and account top-ups. Ivan Su from Morningstar observes, “The removal of these incentives could fundamentally force publishers to overhaul their game design and monetization strategies.”
Tencent, a leading global player in the gaming sector, saw its share price tumble by 12.4% following the NPPA announcement. Vigo Zhang, Tencent Games’ vice president, assured compliance with the new regulations, emphasizing that the focus on protecting younger players has been practical since 2021. Meanwhile, rival NetEase and tech investor Prosus also experienced significant stock declines.
Gaming consultant Daniel Camilo highlighted that these restrictions could severely impact “pay to win” games, necessitating a restructuring of monetization models. He believes that while giants like Tencent and NetEase might recover, smaller gaming companies could face dire consequences.
Interestingly, the government’s initiative also includes streamlining the game approval process and mandating local data storage, potentially impacting international game publishers.
As China tightens its grip on the gaming industry, the effects are far-reaching, from immediate stock market reactions to long-term strategic shifts in game development and monetization. The industry, especially smaller publishers already struggling in 2023, faces a challenging landscape. With the deadline for public comment on these proposals looming, the global gaming community watches keenly, anticipating the final shape of these regulatory changes and their impact on the future of gaming.
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