Video gaming

China’s gaming giants Tencent, NetEase miss out on first round of new license approvals by government

  • Regulator approves 80 titles, the first since March amid a government restructuring
PUBLISHED : Monday, 31 December, 2018, 11:58am
UPDATED : Wednesday, 16 January, 2019, 12:23pm

Chinese regulators have approved a new batch of video gaming licences that end a months-long suspension on new games, but titles from China’s biggest gaming companies Tencent Holdings and NetEase failed to make the list.

The State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) on Saturday published a list of 80 approved titles on its website, the first since March amid a government restructuring. The nine-month freeze put a damper on the gaming industry and hammered the stock prices of gaming firms like Tencent and NetEase.

The list of newly approved games was dominated by small and medium developers, with no titles from Tencent and NetEase. During its third quarter earnings call Tencent said it had 15 games with monetisation approval in the pipeline.

Tencent and NetEase did not respond to requests for comment on Monday, which was a national holiday on the Chinese mainland.

According to local media reports quoting industry sources, licence approvals tend to be granted in the order they are received so titles from the two companies may still be on a waiting list. All games, whether free or paid, are required to obtain a licence to be published in China, the world’s biggest gaming market.

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“Although SME developers dominated the first batch of 80 approved titles, we believe industry forerunners, Tencent and NetEase, which are of higher conformance to strategic directions laid out by the regulatory body, should benefit as the dust settles,” Jefferies equity analyst Karen Chan wrote in a research note.

Chan said she expects a gradual increase in monthly game approvals after the Lunar New Year holiday in February, although it is likely that numbers will fall short of the previous 700 to 800 titles approved each month as the game review process becomes more stringent amid a government push for higher-quality games.

At an industry forum earlier this month, Feng Shixin, a senior propaganda department official, outlined the direction the gaming industry should move towards, encouraging games that promoted originality and positive cultural value while urging game developers to fulfil social responsibilities and expand overseas to promote Chinese culture.

Industry leaders such as Tencent and NetEase, which have strong original game development abilities, are undertaking international expansion, and have taken steps to better protect minors from gaming addiction, are thus likely to benefit from the industry direction laid out by the government, Chan said.

The gaming approval hiatus and crackdown on content have taken a toll on the industry, which saw its slowest revenue growth in at least a decade. Billions of dollars in market value was wiped off companies like Tencent and NetEase.

Earlier this year, China expressed concern over violent games and gaming addiction among minors, with the education ministry stating that it would “implement regulations and controls” on online games, explore an age-restriction system and reduce gameplay time by minors.

Following criticism by government mouthpiece People’s Daily that its popular Honour of Kings game was causing gaming addiction in children, Tencent restricted the playing time for minors and implemented an age-verification system, making it mandatory for players in certain cities to confirm their age before logging on.

In October Tencent reshuffled its business units to place more focus on cloud and smart industries amid pressure on its gaming business, where it derives two-thirds of its revenue.

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