China is set to introduce new regulations to significantly restrict the time and money people spend on video games. These measures, designed to curb in-game purchases and combat obsessive gaming habits, represent a significant challenge to the world’s largest online gaming market, which is still reeling from previous regulatory crackdowns.
The announcement of these draft laws caused a sharp decline in the stock market, severely impacting the value of major tech companies. The regulations extend beyond financial and time constraints, reinforcing a ban on online gaming content deemed harmful to national unity, security, and reputation.
In 2021, Beijing imposed rules limiting gaming time for minors to one hour on Fridays, weekends, and holidays. However, the new regulations are more comprehensive. The National Press and Publication Administration (NPPA), the industry regulator, has mandated that online games must not offer incentives that encourage excessive play or spending. This includes rewards for daily logins and adding funds to accounts.
Analyst Ivan Su from Morningstar predicts that these changes will likely lead to a decrease in daily active users and in-app revenue, forcing game publishers to revamp their game designs and monetization strategies. Additionally, pop-ups warning against “irrational” playing behaviour will be implemented.
The impact of these regulations is significant, particularly for Tencent, the global leader in gaming revenue. Tencent’s share price plummeted by 12.4% following the NPPA announcement. Vigo Zhang, Tencent Games’ vice president, stated the company’s commitment to implementing new regulatory requirements and noted that minors’ engagement with Tencent’s games has decreased since 2021.
NetEase, another gaming giant, saw its shares drop by over 24%. At the same time, Dutch tech investor Prosus, heavily invested in Tencent, experienced a 14% decline. The repercussions extended to Hong Kong’s Hang Seng Index, which fell sharply.
Gaming consultant Daniel Camilo remarked that Tencent and NetEase, known for their “pay to win” free-to-play games, might need to restructure their monetization models or remove some games from stores. While he believes Tencent and NetEase could recover, smaller gaming companies might face closure.
The new regulations also aim to expedite game approvals, requiring a 60-day processing period, and mandate that game publishers host servers for user data within China. The administration is currently seeking public feedback on these proposals until 22 January, as reported by Reuters.
