New rules meant to deter gaming and microtransactions in China have had a huge financial impact on Tencent and NetEase.
Chinese regulators have announced new rules that will outlaw certain in-game rewards and decrease how much money people can spend in a video game.
In 2021, China went as far as to ban everyone under the age of 18 from playing video games, outside of one hour on weekends and during holidays. Although those rules officially ended last year, there have been continued attempts to discourage in-game spending ever since.
Chinese regulators have now tightened its grip on gaming further, and that’s ended up slashing the market share of two of the country’s biggest games company – one being the biggest games company in the world: Tencent.
The changes state that online games will be prohibited 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.
Games will also be required to set limits to how much money players can add to their digital wallets for in-game spending, and companies can’t offer probability-based features to minors, according to the draft put forward by The National Press and Publication Administrations.
The news has panicked investors, and as a result Tencent and NetEase has lost a combined £60 billion in market value.
Shares at Tencent fell as much as 16% at one point, and 25% at rivals NetEase, according to Reuters.
Tencent is one of the biggest multimedia companies in the world, with its subsidiary Tencent Games being the publisher of Call Of Duty: Mobile and PUBG Mobile.
The company owns a number of Western studios, including Funcom, Splash Damage, Riot Games, and Sumo. It also has at least part ownership of many others, such as Turtle Rock Studios, Techland, Supercell, Don’t Nod, Epic Games, Bloober Team, Marvelous, FromSoftware, and even 10% of Ubisoft.
NetEase is also one of the largest video games companies in the world, and helped Blizzard publish Chinese versions of their games, such as World Of Warcraft and Overwatch.
The administration will consider public comments on the new rules through January 22, and the draft could still technically change.
‘The removal of these incentives is likely to reduce daily active users and in-app revenue, and could eventually force publishers to fundamentally overhaul their game design and monetisation strategies,’ said Ivan Su, an analyst at Morningstar, via Reuters.
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