Youngsters in China may feel like the game is up. It isn’t quite as bad for gaming companies, but regulatory uncertainties will linger for a long while.
The Chinese government unveiled a new rule Monday restricting online videogame play to three hours a week, and on public holidays, for people under 18. All online games will be required to connect to an “anti-addiction” system operated by the government and users will need to register using their real names.
Tighter regulations have long been expected, particularly after a harsh commentary in state media labeling such games “opium for the mind” earlier in August, which was later toned down. But the actual policies are still harsher than expected. Young gamers are banned on most days, and on the days they are allowed will be restricted to one fixed hour.
Shares of Chinese game companies reacted relatively well to the news. Tencent —the world’s largest game company by revenue—rose 0.9% Tuesday in Hong Kong while NetEase dropped 2.3%. That may represent relief that the new regulations weren’t more severe; young gamers make up a small percentage of their revenue. Tencent said gamers under the age of 16 accounted for 2.6% of its gross game receipts in China last quarter. Morgan Stanley estimates that gamers under 18 only made up 6% of Tencent’s game revenue and are in the low single digits for NetEase. That’s because the government and gaming companies themselves have already placed restrictions on young gamers in recent years. Some enterprising young people may have circumvented those restrictions, by borrowing an adult’s account for example. But companies will likely now spend more time and effort on policing.
The impact on foreign game companies will be minimal. Almost all top grossing mobile games in China were developed by domestic companies. Some foreign game vendors—like Nintendo —may even benefit if young gamers shift to play games the old-fashioned way, with offline games on consoles for example.
