China has issued its first batch of online gambling licenses, ending an eight-month suspension of regulatory approvals, but analysts say a stricter review process will remain in place for the foreseeable future.
In a move that surprised many, the National Press and Publication Administration released a list of 45 domestic games Monday night that had been approved by the regulator. It is the first time China has approved games since July last year, with authorities saying their aim will be to pass new measures to protect young people and tackle addiction.
Although initial approvals came faster than expected – with market watchers once predicting that China might even extend its online gambling freeze until the end of this year – that’s noticeably missing from the list of Monday is the names of industry heavyweights Tencent and NetEase. The two gaming giants were not included in this first batch of approvals, which includes titles developed by search engine operator Baidu, Shanghai-based game developer Lilith and Shenzhen-based developer iDreamsky Technology. .
Investors saw the approvals as a positive sign for the sector and sent Tencent shares up as much as 5% in Hong Kong on Tuesday. NetEase gained 4.2%. A spokesperson for the Hangzhou-based company said NetEase had no comment on the resumption of online gaming approvals. Tencent did not respond to an emailed request for comment.
Cui Chenyu, a Shanghai-based senior analyst at market research firm Omdia, says uncertainties remain over when China will approve more headlines. But compared to years past, there is no doubt that the pace of regulatory approvals would be slower and fewer games would receive the required licenses.
Indeed, the authorities want to continue to dissuade underage children from playing online games and protect them from what they believe to be an addiction. Ke Yan, head of research at Singapore-based DZT Research, said regulators also intend to reduce the amount of violence in games, while asking developers to add more elements that promote violence. chinese culture.
Ke estimates that the regulator will only approve several dozen titles each month going forward. Long gone are the days when China released hundreds of online games every month. This year’s pace may prove to be even slower than last year, when China approved an average of around 80 titles per month before entering the extended hiatus.
In the current environment, developers are turning their attention to overseas markets. Tencent, for example, has invested in emerging studios, hoping to find promising titles it could help distribute overseas. In the fourth quarter, international games generated $2.1 billion in sales for the company, up 34% from the same period a year ago. Revenue from domestic titles rose just 1% to $4.6 billion, largely due to sales of older titles such as honor of kings and League of Legends: Savage Rift.