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Tencent Profits Drop as China Puts Squeeze on Online Games

19 August, 2018, 13:48 | Author: Janis Wilson
  • Chinese Internet Titan Tencent Falters After Chinese Gov. Bans Game

The Chinese tech conglomerate said that its net income for the three months that ended in June was 17.9 billion yuan ($2.6 billion), a decline of 2 percent compared to the same period a year ago.

In its earnings release, the company said: "In China, DAU [daily active users] for our smartphone games grew at a double-digit rate year-on-year, but monetisation per user declined as users shifted time to non-monetised tactical tournament games". Such a move will allow it to circumvent the Chinese regulators and compete against the US -based Steam, which has earned itself the honor of being the world's largest PC gaming platform with over 43 million daily active users.

China has one of the world's most stringent approval processes for video games, an extension of Beijing's obsession with maintaining control over online content so it can root out dissent and other ideas it considers undesirable, from sex to graphic violence. Tencent hasn't been able to cash in on the world's most popular games, including Fortnite and PlayerUnknown's Battlegrounds. A closely watched Communist Party newspaper publicly chastised Tencent past year over the game, claiming it caused addiction in young people.

"A lot of games have not been approved", said Lau, adding that the government was aware "the restructuring is now affecting the industry as a whole".

This is not the first time Tencent's games have come under scrutiny from regulators.

More news: Afghanistan: Taliban resume deadly assaults in Ghazni

Video games in China have also been criticized for communicating non-socialist ideals (conflicting with the president's repeated mantra of "socialism with Chinese characteristics"), so the future of video games in China remains uncertain.

Chinese regulators have frozen approval of game licenses, Bloomberg reported on August 15, citing people familiar with the matter. Monthly active users climbed nearly 10 per cent to 1.06 billion in the June quarter - a massive population of consumers not just for games and ads but also fledgling services from video to financial services. This is where the authorities have been forced to hold on to the issuing of the gaming licenses in the country. "The fact that Monster Hunter got taken down shows that even Tencent isn't immune from regulatory crackdowns".

Shares of chipmaker Samsung Electronics Co fell almost 2 percent, SK Hynix dropped 3.4 percent, while Japan's Capcom, which developed Tencent's blockbuster game Monster Hunter:World, fell 3 percent.

"This is such a shocking stumble Martin Lau probably felt he had to offer some explanation", Stone Fish said, referring to Tencent's president. "We do not believe this is a question of whether [things will improve] but when", he said.

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