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China’s video game freeze enters fifth month, as NetEase faces challenges over Harry Potter game

  • NetEase shares plunged by as much as 9 per cent on Tuesday after it suspended emulation software on PC for its hit game Harry Potter: Magic Awakened
  • Investors hope a big video game industry conference this month will reveal new details about Beijing’s licensing freeze that started in August

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NetEase, China’s second-largest video game company, recently suspended emulation software allowing gamers to play its hit new game Harry Potter: Magic Awakened on PC, raising concerns about an extended game licensing freeze. Photo: Shutterstock
Josh Ye
China’s suspension of new video game licences has stretched into the final month of the year, clouding prospects for gaming giants Tencent Holdings and NetEase.

NetEase shares fell as much as 9 per cent on Tuesday, but gained more than 4 per on Wednesday, after it suspended the service of its popular emulation software that allowed personal computer users to play its hit new mobile game Harry Potter: Magic Awakened. The company cited the need for technical upgrades, raising concerns about the state of game approvals.

The National Press and Publication Administration (NPPA), which is in charge of licensing video games in China, has not published a list of approved new titles since the end of July. It is the longest freeze on new game licences since a nine-month hiatus in 2018 that followed a regulatory reshuffling.

Beijing’s months-long crackdown on the video games industry has put even the country’s biggest game developers on edge. Last month, the Chinese newspaper 21st Century Business Herald reported that licences would resume by the end of November, citing unnamed sources. Industry executives also told the South China Morning Post that they expected new game approvals within weeks, but they did not specify a date.

Regulators, however, have remained silent on the issue.

Investors hope new details will emerge this month when regulators and company representatives congregate at the state-organised China Game Industry Annual Conference, which takes place in Guangzhou on December 14. The 2018 licensing freeze ended after the conference that year.

“Restarting game approvals would be a major signal that the worst is past in terms of the regulatory cloud on China’s online games sector, so investors are sitting on edge for an update that new titles have gone through the process,” said Matthew Kanterman, senior analyst at Bloomberg Intelligence. “Until then, the cloud of uncertainty remains.”

In response to the NetEase sell-off, US investment bank Morgan Stanley said in a report that it sees the shutdown of the PC software as a one-off incident. However, the bank noted that the move tracks with the broader crackdown on unlicensed games.

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