author: Zuzanna Domeradzka
China Loosens New Game Spending Regulations; Market Reactions Helped
Due to the stock market's violent reaction, China's new gaming regulations will be changed. Given this and NetEase's alleged talks with Blizzard, the future of the industry giants doesn't look as bad as it seemed.
Before the holidays, the news broke regarding the future of video games and their monetization in China. The announced regulations appeared so very unfavorable for two huge companies, Tencent and NetEase, that they worried the investors and led to drastic drops in the shares of Chinese giants on the stock market. It turns out that the authorities have not been completely indifferent to such a reaction.
Changing the rules
Recall that originally the new regulations focused on microtransactions in games. Their effect would have been to limit the revenues of Chinese companies from a wide variety of titles. After all, developers would have had to impose limits on account top-ups, forgo incentives for players to continue playing a game (e.g., through rewards for logging in every day), and warn users against overspending.
The news caused a drop in the value of the shares of Chinese companies (Tencent by 15%, NetEase by 25%). The country's video game regulator (National Press and Publication Administration, or NPPA for short) decided to loosen up and improve the rules after "reliably surveying public opinion" (via Reuters).
We don't know what exactly will be changed and whether the issue of microtransactions in games will ultimately be drastically reduced. Analysts at Nomura, however, are not entirely convinced:
"We believe that these preventive measures may help ease market concerns somewhat, but they will not be enough to eliminate the decline caused by the draft regulation."
Both the stock market situation of Tencent and NetEase has somewhat improved, which may have been the result of the declaration of rule changes in China's gaming industry. Interestingly, in connection with the whole situation, Feng Shixin, head of the publishing unit of the department overseeing the NPPA was to be removed from his position. According to experts this decision may further calm the mood of investors, as they ae selling shares of Chinese giants while strickedn by panic.
Will NetEase and Blizzard finally reconcile?
You probably heard about the fact that early last year Blizzard ended cooperation with NetEase, as the companies did not get along on renewing their licensing agreement. This backfired on Chinese players, who lost access to such games as World of Warcraft or Diablo.
NetEase was agitated by the issue, so much so that it closed down the offices functioning to fulfill the contract with Blizzard, ork statue from WoW, and also demanded $43.5 million in compensation. Despite this uninteresting relationship, the Chinese giant is said to have been in new talks with the US publisher for some time now (via Reuters). Renewed cooperation and access to well-known series would certainly further help NetEase in this uncertain period.
We will observe how the game monetization situation in China develops. Will the announced changes turn out to be entirely in favor of the giants, or will the regulator lead to a compromise, keeping in mind the welfare of gamers and the further fight against addiction.