The Chinese authorities have caused a significant upheaval in the gaming industry with the recent release of a draft of new online gaming regulations. This announcement led to substantial financial losses for major tech companies, amounting to billions of dollars. Specifically, China’s leading gaming companies, Tencent Holdings and Netease, lost an estimated $80 billion in market value as a result of the potential impact of these regulations.
The draft regulations aim to restrict online spending and rewards in video games. Notably, the rules seek to prohibit online games from offering rewards to players for daily logins, initial spending, or consecutive spending within a game. These incentive mechanisms are commonly employed in online games, making the potential implementation of these regulations a significant setback for the gaming sector.
The immediate response to the draft regulations has prompted authorities to consider revising certain sections, particularly those related to daily logins and in-game spending incentives. This indicates a willingness on the part of Chinese regulators to refine the regulations in response to the concerns raised by various stakeholders.
This move by Chinese authorities is not entirely unexpected, given the country’s increasingly strict stance on the gaming industry. In 2021, Beijing imposed stringent playtime limits for individuals under 18 and halted the approval of new video games for approximately eight months due to concerns about gaming addiction. This crackdown resulted in a notable decline in total revenue for the Chinese gaming industry.
While China revisited its position last year and resumed the approval of new games, there has been continued emphasis on limiting the time children spend playing games and regulating their spending. The latest draft of gaming regulations represents the strictest limits to date, prohibiting features such as probability-based draws for minors and the auction of virtual gaming items.
An important aspect of the draft regulations is the requirement for game publishers to store their servers within China, reflecting Beijing’s concerns about user data. The global implications of these regulations are also a concern, as Chinese gaming giants have a significant influence on the overall video games market. The announcement of the draft regulations led to minor losses for US and European video game developers, with Tencent experiencing a substantial 16 percent decline in share value, resulting in an estimated loss of $54 billion.
Given the potential magnitude of these changes, the administration is soliciting public comments on the regulations until January 22. This provides an opportunity for stakeholders and interested parties to provide input on the potential impact of these regulations on the gaming industry.
As Chinese authorities consider revising the gaming regulations in response to widespread concerns, the outcome of this situation will undoubtedly have far-reaching implications for the global gaming market. It will be important to monitor how the regulations evolve and how they ultimately shape the landscape of the gaming industry, both in China and beyond.
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