Tencent’s market value dropped by $20B following new Chinese gaming regulation plans

    
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Earlier this month, there was a flurry of news about the state of game publishing in China. You’ll recall that Monster Hunter World ran into a regulation nightmare in the region when China rescinded Tencent’s license to operate the game there and forced refunds for something like a million people. Even that shouldn’t have been a surprise, as Korean developers had already raised the alarm over the fact that China had apparently ceased approving any new games at all following a bureaucratic overhaul of the government agency responsible for doing so (while Chinese-developed games continued flowing outward, of course).

More bad news for gaming has emerged from China this week, as the country’s ministry of education announced it was intentionally limiting new online games in an attempt to combat what it believes is screen-related myopia (nearsightedness – there is not yet scientific consensus on this topic). The ministry will also implement a new age-restriction system for games and fresh restrictions on play to boot.

According to the BBC, Chinese video game publisher stocks fell on the news; shares in Tencent, for example, dropped 5%, a loss of close to $20 billion US. The publication posits that Chinese developers will continue pursuing international markets – yo, that includes us – to make up for the uncertainty and mess back home.

Source: BBC, Gamasutra
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Armsbend

The Chinese discussion also haven’t been kind to Activision or EA’s stock – particularly EA which has fallen by over 15% this month. The only one that hasn’t been largely affected is Take Two. Namely because of their Red Dead release and the fact they don’t have nearly the Chinese exposure. Sometimes, it seems, it is a good thing to have your game banned in China (GTA).

Xijit
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Xijit

The Chinese have nothing to do with EA, because EA dont sell shit on main land China: the stock value issue is due to EA delaying Battlefield V to next quarter so that it isn’t getting double whammied by Red Dead & COD at the same time … That knocked like $5 billion off of their earnings estimate & and devaluated their stock.

Activision on the other hand is partially owned by Tencent & WoW’s bigges market is China, so yeah China fucking with the MMO market is an issue for them.

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Armsbend

That is true. Except EA was double hammered. They released a crummy earnings report and then the delay of Battlefield 5 – where they further lowered revenue guidance.

tldr – EA is not doing well right now and neither is Activision.

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Sorenthaz

The only real downside to EA not doing well is that folks who are essentially running the frontlines/grunt work over there will potentially get axed from the company.

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Sally Bowls

Certainly, SE is now in the orbit

Variety: Square Enix and Tencent Are Going to Make Games Together

This partnership gives Tencent yet another foothold in the gaming industry. The conglomerate already owns “League of Legends” studio Riot Games and has a major stake in mobile developer Supercell. It also has various minority stakes in “Fortnite” developer Epic Games, “PUBG” developer Bluehole, publisher Paradox Interactive, and mobile games publisher Glu Mobile, to name a few.

VB: The Tencent-Square Enix’s alliance could lead to original games:
The partnership is one of many that Tencent has created in games over the years, almost always as a collaborating investment partner, rather than an outright acquisition. It’s a strategy that has helped it become the world’s biggest game company.

For instance, Tencent owns 40 percent of Epic Games, the maker of Fortnite. Tencent also came to the rescue of Ubisoft earlier this year as a “white knight,” warding off a hostile takeover of the French video game company by entertainment conglomerate Vivendi. Tencent now owns 5 percent of Ubisoft. Tencent also did the same for Activision Blizzard, investing in the company in a bid to extract both Activision and Blizzard from Vivendi in 2013.

Sometimes the investment deals lead to bigger acquisitions. In 2011, Tencent bought majority ownership of League of Legends maker Riot Games, and it acquired the whole Los Angeles company in 2015. In 2016, Tencent bought a majority stake in Finland’s Supercell, maker of Clash Royale and Clash of Clans, for $8.6 billion.

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Sally Bowls

Some numbers:

$20B is 2.5 times the market cap of NCSoft.

Ten Cent is the largest company in Asia so anything involved in it will tend to be big numbers. E.g., In March, it lost US$51B over two days.
https://www.reuters.com/article/us-naspers-tencent-holdings-stock/chinas-tencent-loses-51-billion-in-market-value-in-two-days-idUSKBN1GZ24Q

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Sally Bowls

Remember the WHO & gaming addiction discussions: there may be other Asian or other country politics in play, but IMO it made no sense to blame China for that. China is perfectly capable of making laws regardless of international rules or science.

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Sorenthaz

Meanwhile more drama is going on with Riot if one takes a glance over at the LoL subreddit. ‘course I’m sure that’s a very touchy/messy subject to tip into without opinions running rampant. And some of the more controversial pieces have been deleted by the moderators due to ‘witch hunting’.

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A Dad Supreme

More bad news for gaming has emerged from China this week, as the country’s ministry of education announced it was intentionally limiting new online games in an attempt to combat what it believes is screen-related myopia (nearsightedness – there is not yet scientific consensus on this topic). The ministry will also implement a new age-restriction system for games and fresh restrictions on play to boot.

It’s so refreshing to see the Chinese government ‘so concerned’ about video games possibly harming citizen’s eyesight and wanting age restrictions on games when from 1975 until 2015 they had the “One Child” policy in place as a national law.

A policy that lead to millions of Chinese people over the decades killing baby girls either before or after they were born in order to have one son.

I guess priorities though, right… President Xi Jinping?

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Bruno Brito

I don’t think Xi is worried about the humanitarian concerns of this debacle, instead he just wants to avoid media entering his country to keep it tightly in his hands.

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Frank White

Yeah, China is really becoming the ultimate totalitarian state. For every one step forward, they take two steps back. And now they have something like a million ethnic Uyghurs in concentration camps in the west of China, and we all know what that can lead to. Definitely not a place I’d want to be living in right now.

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John Mclain

I think China is moving to be the next Nazi Germany. (Before someone complains about me using Nazi germany in this context, I’m not reffering to political ideals of nazi germany, merely the totalitarian state’s conditions of military expansion and desire of conquest.)
I personally think china will be the main ignition source for the next world war. North korea may end up being the tinder for the fire. (Much like what nearly happened in the korean war, china damn near started world war 3 there as well.)

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Bruno Brito

Better to compare with Italy then, since Nazism was a special way of fascism.

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Sorenthaz

China’s like that country where it’s a big name and people like to talk up their systems quite a bit, even giving praise to Mao Zedong while completely ignoring/overlooking all the questionable and downright screwed up stuff that has happened under Chinese leadership.

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Mr.McSleaz

Mao had 3 advisers that guided his every move, look into them.

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Tuor of Gondolin

See no evil? Hear no evil? Speak no evil?

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rafael12104

Lol! Shittttte… as in let that be a lesson to you, my friends. Oh, so much here to unpack for me. Don’t worry, just a few bullet points.

First, as I was telling someone else who thinks China is a paper Tiger, they do not give a shit. They don’t need and don’t look for approval from the Corp elite. Profitable or not, the communist party will take or withhold what they want without consequence. And listen, very important here, China would rather starve then cave into Corp demands or US Presidents. Seriously.

Second. Someone in the Chinese government bit hard on the myopia bullshit. All sorts of things cause myopia or contribute to it. Too restrict games to combat it is a hysterical (and I don’t mean funny) overreaction to misinformation and fear. Pay attention, my friends. This is a very small example of what can happen when a political body forgets to act on fact instead of political fiction. We have our own version of “myopia” going on right now in America and it may be much more devastating.

*steps off box*

Alright, who wants some lunch!

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A Dad Supreme

China would rather starve then cave into Corp demands or US Presidents. Seriously.

Agreed. Unfortunately, it’s not like they haven’t starved before and aren’t used to it by now.

https://en.wikipedia.org/wiki/List_of_famines_in_China

” Between 108 BC and 1911 AD, there were no fewer than 1828 recorded famines in China, or once nearly every year in one province or another. The famines varied in severity.[1][2]”

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Utakata

I would rather starve before I cave into the demands of the current sitting President too! Though that maybe for entirely different off-topic reasons. o.O

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Bryan Correll

Good thing you have a PM with nerves of steel who isn’t at all a wuss to protect you.

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Triona Falconer

I’m pretty sure they couldn’t care less about their populations myopia issues… this has way more to do with further tightening foreign influence and profit and restricting ideals and information from the “outside”.

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Bhagpuss Bhagpuss

Good news for us, then. Chinese game developers will be more interested in exporting games to other territories and therefore more likely to tune those games to the tastes that prevail in the markets they target. We get more games that are made with us in mind. Works for me.

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Rees Racer

Having lived in quite a few countries, and travelled extensively, geo-politics are interesting to me, even though we Kiwis don’t generally find much need for all the controversy surrounding world political affairs. I certainly do not wish to engage in any debate concerning such, but this is my observation.

When China’s Communist Party decided to abolish the two-term limit on the presidency, which in theory, could allow Xi Jinping, to rule for life — authoritarian tendencies (for which he is known) can become more persistent and aggressive.

I do believe these sorts of actions are not coincidental with a ruling government that need not worry about future elections and dissent guiding internal policy. Political theorists are somewhat divided on the inherent benefits in so-called “term limits”, so it remains to be seen whether this strategy is part or of a plan to get in front of perceived risks to the population, or more a long-term goal to shape global gaming. Perhaps both, and more.

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Jack Pipsam

If they’re worried about myopia then simply cutting out video games isn’t going to help if everyone is using smartphones constantly and using a computer on a daily basis. Which children might be for, you know, school.
Not to mention work if not only just doing work on computers, but if say you work in a factory where you’re looking at tiny objects all day. I mean people who read a lot also get it. So replacing screens and shoving their heads into books with tiny text will do the same.

I have myopia due to the fact that I’ve been staring into computer screens my whole life from a young age, but even if you removed video games… well I’d still have been looking at screens my whole life for not just school, but also general entertainment stuff and faffing around on the internet. Take away games and I would have just been a bookworm instead which most likely had the same effect.
Providing you have the privilege to access optometrists and afford glasses, it isn’t a super big deal.

Personally speaking, myopia doesn’t bother me. I certainly wouldn’t swap how much my life has been improved due to computers (including gaming) vs. the mild inconvenience of having to wear glasses when driving or watching a movie.

So I reckon this is just a sneaky way for the Chinese government to crackdown on games for their own reasons under the ever-effective guise of “think of the children”.

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Indigo Salma

China killing their own businesses.

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Armsbend

You have missed the constant barrage of attacks a sitting president has used against American tech companies?

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Schmidt.Capela

Also, this might in the end strengthen the dominance of Chinese game makers in the Chinese market, as both it looks like the standards will be more harshly applied to imported games and it could create a mismatch between design parameters of imported games and Chinese regulations (for example, imported games might very well be designed to be best enjoyed when played for more daily/weekly hours than the new Chinese regulations allow).

The Chinese might make some dumb moves from time to time, but for the last decades they have been using the huge influence their autocratic government can exert over private companies — influence on a scale more democratic countries simply can’t match — in order to greatly increase their economic growth and technological advancement; in mere decades they went from a poor country with very little self-developed technology to having one of the best per-capita GDP among developing countries and a cutting edge industry that in some fields is the world leader.