Shares of the world's largest gaming companies have plunged after tougher regulation.
On Friday, Chinese regulators issued a broad new set of rules aimed at reining in spending and reducing various incentives and bonuses that encourage players to spend more time playing video games. The move is a major blow to the world's largest video game market, which has regained positive growth momentum this year after a downturn in 2021.
According to the innovations, strict limits on spending in online games are actually introduced. In particular, in online games, it is now forbidden to encourage players with rewards for daily login to the game, for the first replenishment of the game account, or for several deposits in a row. Similar methods of encouraging users were actively used by video game developers.
After the publication of the new restrictions, shares of Tencent Holdings (the world's largest gaming company) fell by 16%, and its main competitor NetEase - by 25%.
In recent years, the Chinese authorities have steadily increased regulatory pressure on the video game segment. In particular, in 2021, strict restrictions on gaming time were introduced for gamers under the age of 18. In addition, the approval and release of new games in China was completely suspended for almost 8 months, which was explained by the risks of developing gambling addiction among adolescents.
Despite the formal end of the ban in 2022, Chinese regulators continue to strengthen controls and introduce new rules to limit the volume of in-game payments and user spending.
At the moment, the new rules are the most stringent regulatory measures to curb spending in online games. In addition to the ban on various bonus programs, games are also required to set limits on the replenishment of electronic wallets used for in-game purchases.
In addition, games now prohibit offering minors the opportunity to participate in lotteries, as well as allowing them to speculate or sell virtual game items for real money.
Chinese authorities are also concerned about the privacy of user data. Under the new requirements, all online game publishers are required to store player information on servers inside China.
However, among the new restrictive rules, there is also a provision that the Chinese gaming industry has long sought. Now, regulators are required to review and issue permits for the release of new games within no more than 60 days.
Due to regulatory restrictions in 2021, the Chinese gaming industry experienced the most difficult year in history, showing a drop in total revenue for the first time. China's market has returned to growth this year, with domestic revenue rising 13% to 303 billion yuan ($42.6 billion), according to industry association CGIGC.
On Friday, Chinese regulators issued a broad new set of rules aimed at reining in spending and reducing various incentives and bonuses that encourage players to spend more time playing video games. The move is a major blow to the world's largest video game market, which has regained positive growth momentum this year after a downturn in 2021.
According to the innovations, strict limits on spending in online games are actually introduced. In particular, in online games, it is now forbidden to encourage players with rewards for daily login to the game, for the first replenishment of the game account, or for several deposits in a row. Similar methods of encouraging users were actively used by video game developers.
After the publication of the new restrictions, shares of Tencent Holdings (the world's largest gaming company) fell by 16%, and its main competitor NetEase - by 25%.
In recent years, the Chinese authorities have steadily increased regulatory pressure on the video game segment. In particular, in 2021, strict restrictions on gaming time were introduced for gamers under the age of 18. In addition, the approval and release of new games in China was completely suspended for almost 8 months, which was explained by the risks of developing gambling addiction among adolescents.
Despite the formal end of the ban in 2022, Chinese regulators continue to strengthen controls and introduce new rules to limit the volume of in-game payments and user spending.
At the moment, the new rules are the most stringent regulatory measures to curb spending in online games. In addition to the ban on various bonus programs, games are also required to set limits on the replenishment of electronic wallets used for in-game purchases.
In addition, games now prohibit offering minors the opportunity to participate in lotteries, as well as allowing them to speculate or sell virtual game items for real money.
Chinese authorities are also concerned about the privacy of user data. Under the new requirements, all online game publishers are required to store player information on servers inside China.
However, among the new restrictive rules, there is also a provision that the Chinese gaming industry has long sought. Now, regulators are required to review and issue permits for the release of new games within no more than 60 days.
Due to regulatory restrictions in 2021, the Chinese gaming industry experienced the most difficult year in history, showing a drop in total revenue for the first time. China's market has returned to growth this year, with domestic revenue rising 13% to 303 billion yuan ($42.6 billion), according to industry association CGIGC.
