Nearly $80 billion in market value has been wiped from Tencent and Netease, China’s two biggest gaming companies, following the introduction of new regulations on online and mobile games.
According to Reuters, China announced online on Dec. 22 that games can no longer offer daily login bonuses and rewards for spending money on them for the first time or several times consecutively. All of these are commonplace in online and mobile games nowadays, especially daily logins that exist to encourage people to play every day. There are so many that do this, such as Marvel Snap and Pokémon Masters EX, with the incentive typically being in-game currency.
China has notably been cracking down on video games; it already introduced limits on how long people under the age of 18 can play due to concerns of addiction among children. Now the focus is on curbing in-game spending. Aside from the bans, games must impose their own limits on the amount of money players can add to their digital wallets.
Considering the number of horror stories there are of people overspending on in-game purchases, with some fearing children are developing gambling addictions, these preventative measures sound like they can only be a good thing—but not for gaming companies. Tencent, the largest company in the games industry, lost over $43 billion (via CNBC) as its shares dropped by as much as 16 percent. NetEase was hit even harder, with a 25 percent drop in shares.
Ivan Su, an analyst at Morningstar, told Reuters these regulations could “force publishers to fundamentally overhaul their game design and monetization strategies” since there will likely be a drop in active daily users and in-game revenue. You have to imagine studios behind free-to-play games are panicking since they primarily make money through microtransactions.
It’ll be interesting to see if this has a reverb effect on the West. For example, Genshin Impact, a free-to-play game run by Chinese company miHoYo, will surely have to comply with the new regulations. Since it’s also incredibly popular in countries outside China, will any overhauls made to the game apply worldwide or be restricted to just Chinese players? It wouldn’t be out of the ordinary for the rest of the world to be unaffected. As a point of comparison, EA had to remove loot boxes from its FIFA games, but only in Belgium due to the country’s ban.
