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China ends game freeze by approving first titles since July

Bloomberg4/11/2022 09:14 PM GMT+08  • 3 min read
China ends game freeze by approving first titles since July
The resumption of gaming approvals is likely to quell investors nervous about the prospects for Tencent’s largest business. . Bloomberg
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China has approved the first batch of new video game licenses since July, people familiar with the matter said, ending a months-long hiatus that put the world’s largest mobile gaming arena on edge.

The National Press and Publication Administration has distributed to developers a list of approved titles, the people said, asking not to be identified discussing a private communique. That list will be uploaded to the agency’s website soon, they added. It wasn’t clear if the approved titles included any games from industry leaders Tencent Holdings and NetEase.

NetEase rose more than 8% in pre-market trading in New York. An XD Inc representative told Bloomberg News that its “Flash Party” was among the games approved, but didn’t elaborate. Shenzhen developer iDreamSky Technology Holdings’s “Watch Out For Candles” also won a license, founder and CEO Michael Chen said.

Beijing’s far-reaching tech crackdown -- which has ensnared sectors from e-commerce to fintech and even online education -- spread to online gaming in August, when regulators introduced stringent measures capping play time for minors and imposed new requirements aimed at curbing addiction. The media watchdog has also been reviewing new titles to determine whether they meet stricter criteria around content and child protection, an effort that’s slowed rollouts, Bloomberg News has reported.

NetEase declined to comment while Tencent had no immediate comment. Representatives for the agency weren’t immediately available for comment after business hours.

The resumption of gaming approvals is likely to quell investors nervous about the prospects for Tencent’s largest business.

See also: Business red tape in China gets a trimming

Investors who had suffered losses during a 10-month freeze on game monetization licenses in 2018 experienced deja vu in 2021, when a state-backed newspaper accused the industry of peddling “spiritual opium” before walking back that charged description. In September, regulators summoned the top game publishers to discuss further oversight of their titles and the need to de-emphasize profits, the official Xinhua news agency reported. In November, the 21st Century Business Herald reported game approvals may restart soon, sparking a rally in gaming stocks.

But the slowdown has already started to weigh on Tencent’s most lucrative division, which is still heavily reliant on the longevity of hit titles Honor of Kings and Peacekeeper Elite. Domestic gaming revenue climbed just 1% during the December quarter, lagging the 34% increase in its international business, dragging Tencent’s overall sales growth to its slowest pace since 2004.

See also: China Evergrande will swap defaulted debt in court restructuring

Executives have stressed they see the domestic challenges as “temporary,” adding that they had a large backlog of games ready for launch once uncertainties ease. After weeks of delay, the company introduced the highly anticipated League of Legends mobile title in China in October, while the franchise’s e-sports tournament and new anime series have attracted hundreds of millions of views.

But uncertainty continues to dog the online social media and entertainment sector. China last week kicked off a formal campaign to rein in the potential abuse of algorithms by internet giants from ByteDance Ltd. to Tencent, taking aim at the way social media platforms serve up ads and content to hook users.

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