China resumes approving new video games again after a 9-month hiatus

Tencent is being excluded from China’s first batch of gaming approvals after a 9-months break.

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China resumes approving new video games again after a 9-month hiatus

After nearly a year-long ban on new video games in China, the country’s regulatory arm approved 80 new video games licenses on Saturday, according to an article by Reuters. However, Chinese social media and gaming giant Tencent and NetEase have both been excluded from this first batch of new video games.

In March this year, China – the world’s largest gaming market – began putting a hold on the issue of new video games licenses in the country, amid growing criticism and allegations that the games are to be blamed for addicted young users, myopia amongst the young and also for their violent content. As a result of this ban, China’s gaming market grew by a mere 5.4% annually for H1 2018, the slowest over the past decade.

The sudden and swift ban on China’s gaming industry saw Tencent’s shares plummeting even as the gaming mammoth struggled to adapt to the change in governmental stance. Tencent also posted first dip in profits in a good ten years.

One major reason could be due to the decline in gaming revenue. While Tencent is prominently known for its WeChat, its gaming business actually contributes more revenue as opposed to its social media business. Some examples of Tencent’s popular games include Square Enix, Supercell,  and Grinding Gears Games. Specifically, Tencent’s Q3 earnings fell by 4% following the Chinese government game suspension move. The company claimed to have 15 games that are still pending for governmental approval.

Partnering Garena was Tencent’s attempt at expanding beyond the shores of China to leverage on the potential of Southeast Asia’s gaming industry. Another strategy employed by Tencent was its third major restructure to shift its focus on the B2B businesses like cloud and map services.

While China’s regulators’ attempt to kickstart greenlighting gaming license again is something to cheer about for Chinese gaming companies, its system to approve new gaming titles is still rather opaque. Currently, there are at least 7,000 titles still in the pipeline and only 3,000 are slated to get their official permits in the coming year.

With the long queue of gaming licenses awaiting approval and the fact that China’s approval methods lack transparency, Tencent is likely to find itself making changes such as expanding its age verification system to no avail. From March 2018 till now, Tencent has yet to get any approval for its 15 new video games in the pipeline despite efforts of trying to meet regulatory requirements after the clampdown on China’s gaming industry.