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China approves first batch of video games in 9 months

Written by Nikkei Asia Published on   2 mins read

Unofficial freeze ends, but no new titles licensed for NetEase and Tencent.

China granted new video game licenses on Monday for the first time in nine months, but none of the 45 approved titles came from the big domestic leaders NetEase and Tencent Holdings.

The newly authorized titles are from companies including Lilith Games, XD, and Seasun Entertainment, according to the release from the National Press and Publication Administration (NPPA).

Video-sharing website Bilibili rose more than 7% in New York, with NetEase climbing just over 2%.

Beijing suspended approvals for new games in July, giving no reason or even an official acknowledgment of the decision. Thousands of small developers lost a critical revenue source, forcing some to tap overseas markets for survival. Before the July freeze, China’s gaming regulator typically signed off on 80 to 100 new games a month.

Chinese authorities last year also limited online players younger than 18 to just three specified hours a week.

XD said an application for its Flash Party game was submitted early last year, with plenty of back-and-forth discussion in the review before approvals ceased in July.

“We expect a slight improvement in the company’s business outlook in the Chinese market this year now that Flash Party, which was already launched in Japan in February and still remains one of the top five free games in Japan’s App Store, has been approved,” XD said.

A senior executive from a top gaming company said it was no surprise that none of its titles received approval on Monday.

“China froze new-game approvals in 2018, too, and when it resumed approvals after nine months, neither Tencent nor NetEase was on the first approval list,” the executive told Nikkei Asia.

Jefferies Research analyst Thomas Chong said in a note that the new approvals are a “positive catalyst” and they expect games of different genres will be released in future approvals.

A basket of companies, including Tencent, Bilibili, NetEase, Kuaishou, XD, Kingsoft, 37 Interactive, G-bits, and Perfect World, are set to benefit from the news, Chong said.

Tencent’s domestic gaming revenue grew just 1% on the year for the fourth quarter to RMB 29.6 billion (USD 4.65 billion), while declining 11.9% from the previous quarter.

But the company’s international gaming revenue climbed 34% to RMB 13.2 billion. An employee recently told Nikkei Asia that Tencent has boosted overseas gaming staff “quite a lot” over the past few months, specifically for research, development, and marketing.

In the December-quarter earnings call, Tencent President Martin Lau said the company would continue to invest in core businesses including international games this year.

NetEase, Tencent’s top rival, posted October-December revenue of RMB 17.4 billion from online gaming, up 29.8% on the year.

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.


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