China Stops Approving New Games for Sale

Gladys Abbott
August 16, 2018

Tencent, which has lost more than US$150 billion in market value since January, reported a 2 per cent drop in second-quarter profit on lower gaming revenue and investment-related gains.

The world's largest videogame company said its net income last quarter fell 2% from a year ago-the first such year-over-year decline it has recorded since 2005.

Industry executives have said many games in China, and not just those belonging to Tencent, have since March faced a hiatus in license approvals after China revamped its content regulatory body and divided its powerful State Administration of Press, Publication, Radio, Film and Television earlier this year.

Morton said he remained bullish on Tencent shares and that regulatory risk in China versus the rest of the global gaming market has always been there.

"The gaming fundamental is actually as strong as it has been", Lau said, pointing to growing user numbers and downloads for the company's games. The company blamed that on "non-monetisation of popular tactical tournament games and timing of new game releases". "This is something which is a little bit out of (our) control".

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Chinese gaming company Tencent was ordered to remove the blockbuster title from its PC gaming platform WeGame on Monday following "a large number of complaints" without further elaboration.

"League numbers are down from their peak, but it's still one of the most-played games in the world and we're very happy with the numbers, and we think some of the new content we're putting out soon can only help with player numbers", Riot said in a statement to Dot Esports. The stock has slid more than 17 per cent this year, while New York-listed rival Alibaba Group Holding remained mostly unchanged.

"The key here is, not only PUBG, but no games are able to get licenses now", a person from Tencent told Reuters on Tuesday on condition of anonymity due to the sensitivity of the matter.

While there is a "green" process that enables the company to test monetization of games, that won't apply to PUBG because of its sheer scale, Lau said. Mobile gaming revenue jumped 19% year-over-year, making for a sequential decline of 19%. Revenue rose 30 per cent to 73.7 billion yuan, but that's its slowest expansion in since 2015 and fell short of estimates for 77.7 billion yuan.

Lau said Tencent would mitigate the impact by measures including scaling back on marketing expenses of its payment services. Monthly active users climbed nearly 10 per cent to 1.06 billion in the June quarter - a massive population of consumers not just for games and ads but also fledgling services from video to financial services.

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