According to UBS, China’s planned gaming regulations will disproportionately affect smaller developers and lower total internet advertising income. Following the publication of draft guidelines by China’s National Press and Publication Administration that would forbid encouraging daily sign-ins for games among other revenue-generating tactics, shares of Tencent, NetEase, and Bilibili fell to their lowest levels in over a year on Friday. The deadline for comments is January 24. On Monday and Tuesday, the markets in Hong Kong are closed for Christmas.
Kenneth Fong, head of China Internet research, at UBS, said in a note.
“Big game developers or big DAU [daily active user] social games should fare better: This is because they have other means to boost gamers engagement, reach out to users and have stronger R&D capabilities to attract and retain gamers.”
He continued, “With a lower revenue for online games, the ad industry would be impacted too.”
Internet games, according to UBS, generate 20% of the money made by the internet advertising sector. According to third-quarter disclosures, the bulk of NetEase’s income comes from gaming, while at Tencent and Bilibili, it makes up approximately one-fifth or less. Although Beijing has made it apparent in recent years that it would prefer to restrict gameplay, particularly among minors, many other businesses still produce and distribute games in China.
According to third-quarter disclosures, the bulk of NetEase’s income comes from gaming, while at Tencent and Bilibili, it makes up approximately one-fifth or less. Although Beijing has made it apparent in recent years that it would prefer to restrict gameplay, particularly among minors, many other businesses still produce and distribute games in China.
UBS Analyst Kenneth Fong on the new policy
Fong stated that it is challenging to estimate the financial impact of the proposed legislation since it is not clear if it would just apply to recently released games or to those that are already in existence. After announcing on Friday that it had authorized 40 import games, the National Press and Publication Administration, which oversees the release of new games, said on Monday that it had authorized over 100 new domestic games.
Fong anticipates that newer games would be more impacted than older ones overall. He stated, “We believe the game developers would likely design other means to attract and retain users, as the online gaming industry is a very creative one.”
Tencent selloff Following the unexpected implementation of new gaming restrictions, which stoked concerns that Beijing may once more be targeting the nation’s massive internet industry, Tencent Holdings Ltd. spearheaded a $80 billion selloff in some of the largest online brands in China.
Earlier this week China imposed new rules on Online Gaming
The new rules come after Chinese authorities imposed new gaming restrictions in 2021 and a number of fines for Chinese internet companies. These included genuine name identification and strict play time limitations for players under the age of eighteen, citing the need to combat gaming addiction and other health problems. For around eight months, regulators also stopped approving new gaming licenses and the capacity to make money from games.
