The new rules, which effectively set spending limits for online games, dealt a big blow to the world’s biggest gaming market. Tencent shares tumbled 12.3%, while Netease plunged 24%.
Shares of China’s biggest gaming companies plunged on Friday after Chinese regulators announced rules that aim to curb spending and rewards that encourage video games.
The new rules, which effectively set spending limits for online games, dealt a big blow to the world’s biggest gaming market, which returned to growth this year. Online games will now be banned from giving players rewards if they log in every day, if they spend on the game for the first time or if they spend several times on the game consecutively. All are these are common incentives in online games.
The proposals also would prohibit minors from tipping hosts who livestream games and would stop companies from offering probability-based lottery services to under-18 users. Forced player-duels and content that threatens national security also will get under the ban.
Tencent, the Chinese technology company ended the day down 12%, losing $46 billion in market value. This marked the biggest intraday drop since 2008. Gaming accounts for about 70% of NetEase's revenue and about 30% of Tencent's revenue. In total, NetEase and Bilibili, a social network popular among gamers, lost $80 billion in capitalization after the release of Tencent's draft new rules on Friday.
The National Press and Publication Administration said it is seeking public comment on the rules until Jan. 22, 2024.
Beijing has become increasingly tough on video games over the years. In 2021, China set strict playtime limit for players younger than 18 and suspended the approvals of new video games for about eight months, citing gaming addiction concerns.
Although the crackdown formally ended last year with the resumption of new game approvals, regulators have continued to dish out restrictions to curb “in-game” spending.
Sources: Bloomberg, WSJ, Asia Financial
