China gaming crackdown: 2023 to be better than last year for Tencent and NetEase as Beijing eases game licensing restrictions
- According to recent state media articles, Beijing now views the industry as an important business instead of ‘spiritual opium’
- Even with more game approvals, video gaming firms will need to work hard to turn their fortunes around, some analysts say
China’s video gaming companies led by Tencent Holdings and NetEase, battered by an economic downturn, shrinking user base and regulatory woes, had a good end of year as Beijing doled out a batch of new game licences, raising investor hopes for a fruitful 2023.
The National Press and Publication Administration (NPPA), the agency responsible for licensing video games in China, granted 84 new games to domestic developers in December, the largest batch of the year. It also gave the nod to 44 imported games – the first such approvals for 18 months.
The 128 game approvals cover a number of long-awaited imported games such as Valorant by Riot Games, a shooting title that will be brought to China players by Tencent, lifting morale in an embattled gaming industry and signalling that the worst may be over.
In total, China approved 512 games in 2022, including 468 domestic games and 44 imported games. That is still just two thirds of the amount approved in 2021, which included 679 domestic games and 76 imported games, and less than 40 per cent of the amount in 2020.
Tencent Holdings and NetEase, China’s two largest gaming companies, secured eight and five licences in the year, respectively, down from nine and 12 in 2021. However, not all analysts ascribe the domestic industry’s troubles to licence approval limits alone.
“China’s video gaming industry [still] lacks really innovative products,” said Zhang Shule, a researcher at Beijing-based research institute Kandong. The lack of exciting new titles has partly contributed to market weakness with foreign titles often used to stir a reaction in the domestic market, he said.