New regulations, new business model? Chinese gaming companies await new regulations

China's gaming giants might have to change their business models. That's the conclusion of a senior tech analyst as a public consultation phase on proposed changes to the country's massive video game market comes to a close.

In December regulators announced a wide range of proposed rules aimed at curbing spending and rewards that encourage players to stay online.

"Currently we do not know the difference between the real policy and the draft," said Chenyu Cui, an analyst in Asia Pacific markets (with a focus on China) for global tech consultancy Omdia. "But if the draft proposals are implemented, it will impact the revenue very significantly because it limits the spending from all people."

The new rules sparked alarm among investors and wiped around $80 billion in market value from China's two biggest gaming companies, Tencent and NetEase.

Among other proposals, regulators have called for a ban on rewards for logging in each day, buying products in the game for the first time and making several consecutive purchases.

Chenyui told CGTN Europe she believes changes could be made to the draft regulations, because as they stand China's gaming companies would need to seek new ways to make money. "So it would mean publishers need to introduce alternative, monetization modes of their games, even for their most profitable games."

Chinese authorities are thought to be working towards preventing a culture of addictive gaming. In 2021 they introduced regulations to limit the play of minors.   That was something echoed just days ago by Tencent which announced children would be limited to a total of 16 hours across this year's month-long Spring Festival.

Chenyui said regulators are taking a three pronged approach to protect children, looking at content with an eye to reducing violence, limiting screen time and putting curbs on in-game spending.

READ MORE

Who are the Houthis?

Palestinian state 'not impossible' after Netanyahu call, says Biden

Chinese tourism boosting industry's post-pandemic rebound: UN expert

Many parents in China are thought to be supportive of the new rules.

According to Chenyu: "I think parents in China, they don't like their child to play games. A lot of times they even don't want their child to play any games at all.  So the parents are really positive about this kind of regulations. I think for the gamers, they have a lot of concerns."

And there are a lot of gamers. China is the biggest gaming market in the world, with more than 650 million players in the country, which equates to roughly half of the population. China's gaming sector also generated the most revenue globally, which in 2022 stood at $45 billion.

So how are China's gaming companies approaching these new regulations?

"I think the gaming publishers are still positive about their gaming business," Chenyu told CGTN Europe. "But I think they are looking for other ways to try to grow their business. For example, they are looking for more opportunities in the overseas market, not in traditional Southeast Asian countries, but also in the Western market, the Middle East and Brazil."

Chenyu said gaming companies are also looking to diversify, using their advanced tech in other areas such as the fintech sector. "The online gaming publishers, they still have a positive attitude to online games, but they are also looking at other opportunities as well."

Subscribe to Storyboard: A weekly newsletter bringing you the best of CGTN every Friday