When it comes to the gaming industry, the Chinese market is important. However, this market has also become rife with restrictions due to the government’s intervention. Unfortunately, this market has once again become the target of regulation as the lawmakers in China have announced several rules aimed at curbing spending in video games. This could be a fatal blow to many of the most popular video games in the current market as some of the rules affect the systems that keep payers engaged.
The news comes from a report from Reuters that talks more about this perturbing subject for gaming investors. The report talks about how China aims to impose spending limits on games by default. Perhaps more damning, the rules also advocate for the removal of features that usually keep players engaged in the game. Such features include things like Daily Log-in rewards and consecutive-day rewards in games. This is a practice that’s commonly seen in games such as Genshin Impact and other online games like it.
According to the Reuters report, the announcement of this ruling has already thrown several investors into a frenzy. Nearly $80 billion in market value was completely wiped from China’s two biggest gaming companies. For more accurate numbers, Tencent’s stock dropped by as much as 16% while NetEase lost roughly 25%. The numbers are very likely to remain in a steady drop as the aforementioned rules begin to make an impact on the gaming industry’s biggest online titles.
“It’s not necessarily the regulation itself – it’s the policy risk that’s too high,” said Steven Leung, executive director of institutional sales at broker UOB Kay Hian in Hong Kong. “People had thought this kind of risk should have been over and had started to look at fundamentals again. It hurts confidence a lot.”
It’ll be interesting to see where the gaming industry goes from here as daily log-ins and other incentives have been the standard for years. Whether this ends in a localized change in scope or a full-on breakdown across the entire industry remains to be seen but you can be sure to stay tuned at PUG to be in the know.
