China halts video game licence approvals

Participants in the fighting video game Street Fighter V at the Hong Kong Esports festival last year.
Participants in the fighting video game Street Fighter V at the Hong Kong Esports festival last year. PHOTO: AGENCE FRANCE-PRESSE

HONG KONG • China's gaming market is feeling the chill after regulators froze approval of licences for online, mobile and console games.

The halt follows a restructuring of power among departments, said sources. Regulators have also been concerned about violence and gambling in some games.

Tencent, the country's gaming and social media Goliath, has shed more than US$160 billion (S$220 billion) in market value since its January peak.

China has one of the world's most stringent approval processes for video games, an extension of Beijing's obsession with maintaining control over online content so it can root out stuff it considers undesirable, from sex to graphic violence.

But its huge smartphone and Web population also makes it the world's top gaming market, with an estimated US$37.9 billion in revenue, according to research by Newzoo.

Two departments oversee the process. The National Radio and Television Administration has not granted licences for about four months. The Ministry of Culture and Tourism has made game registration procedures more stringent.

Both agencies have gone through personnel changes and restructuring of responsibilities following a shake-up earlier this year as President Xi Jinping consolidated power.

With the leadership transition, bureaucrats have been reluctant to take risks or initiate steps that could become controversial.

Dozens of companies may be affected. Tencent and Netease are among the biggest game distributors in China, licensing titles from developers such as Activision Blizzard and Electronic Arts in the United States and Capcom in Japan.

Even if the regulators resume approvals immediately, the typical process takes two to three months, signalling potential weakness in the third quarter for companies like Tencent.

The halts come as China's Internet sector undergoes a crackdown ahead of a vital Communist Party gathering later this year.

Tencent has been forced to curb playing time for children, as regulators step up scrutiny on online gambling and gaming addiction.

Tencent still has not received full approval to introduce desktop versions for two of the world's hottest games - PlayerUnknown's Battlegrounds and Fortnite.

Still, Mr Shawn Yang, executive director of Blue Lotus Capital Advisors, voiced confidence that the company would get approvals again.

"We don't think that the regulation will impact the sector forever. We think that Tencent is still able to break this siege and continue to publish new and popular games," he said.


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A version of this article appeared in the print edition of The Straits Times on August 17, 2018, with the headline China halts video game licence approvals. Subscribe