Numerous employees at several Chinese video game companies are losing their jobs after a lengthy period where regulators issued no licenses for new games. The licensing freeze has lasted for six months, leaving game developers and publishers in limbo as they wait for a reboot in the official approval process for video game distribution in China.
Gaming giant Perfect World, one of China’s largest gaming companies after Tencent and NetEase, and a partner of Steam China, said that it removed “several hundred people” from its staff body in Q4 2021 to cut costs as revenue slumped. There are currently 4,000 employees in Perfect World’s R&D department, and up to 1,000 of the posts will be trimmed in the following months, the company said.
Bilibili and Baidu have also cut jobs in their video game divisions over the past two months.
China’s video game industry has been subject to a regulatory freeze since July 2021, when the approval process for new games was halted. Government officials said they suspended these reviews to create a “healthier” environment for young people and prevent game addiction. Video game companies then faced even stricter conditions when playtime for minors was limited to three hours per week beginning in August 2021. The final blow came when several games were removed from app stores.
China’s regulators issued a total of 755 new game licenses between January 1 and July 22 in 2021, a 46% drop from the full year’s count for 2020, according to Gamelook, a media outlet that covers video games in China. The months-long license freeze has dragged the video game sector’s total sales to RMB 296.5 billion (USD 46.6 billion) for all of 2021. The year-on-year growth rate was 6.4%, a three-year low, and user growth stagnated, a report published on the industry’s annual summit shows.
Video game publishers expected regulators to restart the approval process in November 2021, but the pipeline remains stalled.
The pause in new game approvals has been particularly damaging for smaller developers. More than 14,000 video game companies shuttered in the second half of 2021, according to business data aggregator Tianyancha.
Ultra Console Game, a major magazine in China, suspended publication on Wednesday after regulators ordered it to “rectify” its content. In the past, it has published articles about unlicensed video games, beta releases of new games, and games that are available overseas but remain unlicensed in China.