China video gaming crackdown: no licence issued in October deals another blow to struggling industry

By Ann Cao

The absence of new approvals comes after the government issued more than 300 licences between April and September. The world’s largest video gaming market has seen sales plunge amid a slowing economy and tightened restrictions. — SCMP

China issued no new video game licence in October, breaking a string of approvals since June and sending chills through an industry grappling with a market downturn and continuous government scrutiny.

The pause by the National Press and Publication Administration (NPPA), the agency responsible for licensing video games in China, went against the beliefs of many analysts and industry insiders, who thought the approval process had returned to normal after an eight-month licensing freeze ended in April.

That month, the NPPA licensed 45 new games. While no licence was approved in May, analysts widely considered it an operational delay stemming from a Covid-19 outbreak in Beijing, rather than a new policy signal.

The agency went on to give out 269 more licences from June to September.

The absence of new approvals in October, however, was unexpected.

It came in the same month that the Chinese Communist Party held its twice-a-decade congress. Authorities also delayed the release of official monthly trade and economic data for 10 days and six days, respectively, without giving a reason. The information came out after the meeting concluded.

Meanwhile, the NPPA has yet to publish its annual list of approvals for imported video games, which was released in June last year. Titles developed by foreign companies cannot officially launch or operate in China without a licence.

The lack of approvals in October will have limited impact on the industry for now, according to Zhang Yi, chief executive at Guangzhou-based iiMedia Research.

“There is no need to worry about the immediate impact of a one-month delay, because there is a relatively long period between the granting of a licence and (the launch of) the actual product,” he said.

“However, the regulator’s method of regulating the market through controlling the number of new game licences is likely to become the norm.”

A video game store in Shanghai. Photo: Reuters

Still, the delay has raised uncertainties in the world’s largest video gaming market, which has been hit by a slowing economy and tightened regulations.

Despite the resumption of video game approvals earlier this year, the number of licences granted is still significantly smaller than in previous years.

The government has also been strictly enforcing play time restrictions on young online gamers, enacted last August to clamp down on video game addiction. Under the rules, people under age 18 cannot play online games for more than three hours a week.

In the third quarter, China’s mobile game sales slid nearly 25% from last year to 41.6bil yuan (RM27.09bil), the lowest since the start of the Covid-19 pandemic in 2020, according to a recent report by Chinese video gaming intelligence firm CNG.

A young person plays an online game at an Internet cafe in Shenzhen. Photo: Shutterstock

Total video game sales in the country declined 19.1% year on year to 59.7bil yuan (RM38.87bil), the report said, despite the third quarter being traditionally a peak season for video gaming, with schools breaking for summer.

Even the industry’s largest players are not immune to mounting challenges.

Tencent Holdings, which runs the world’s largest video gaming business by revenue, reported a sales decline in the second quarter, the company’s first quarterly drop since its 2004 listing. During the period, it slashed nearly 5,500 employees from its payroll.

In September, Tencent won its first video game licence in 15 months, but it was for a small mobile title that is not expected to become a blockbuster. – South China Morning Post

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