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China’s New Gaming Rules: ImpacDevt on elopers and Advertising

2023.12.26

 

Key Takeaways

  • China’s new gaming rules likely to hit small developers harder, reducing online ad revenue.
  • Large gaming firms like Tencent and NetEase may better adapt due to robust R&D and engagement strategies.

Impact on Game Developers

China’s proposed gaming regulations, focusing on banning daily sign-in incentives, are expected to have a more significant impact on smaller game developers. UBS analysts note that larger companies with robust research and development (R&D) capabilities, such as Tencent, NetEase, and Bilibili, might navigate these changes more efficiently. They have the resources to engage users through alternative methods and adapt their games to new regulations.

Reduction in Online Advertising Revenue

The new rules may also lead to a decline in online advertising revenue. Since online games contribute approximately 20% to the online advertising industry’s revenue, any reduction in gaming revenue could have a ripple effect on the overall digital advertising market. This is particularly relevant for companies where gaming forms a significant portion of their revenue, like NetEase, Tencent, and Bilibili.

Regulation Specifics and Uncertainty

The draft rules prohibit practices like incentivizing daily sign-ins, a common feature in online games to boost user engagement and gather valuable user data. The extent of the financial impact of these regulations is still uncertain, as it is unclear whether they will apply to both new and existing games.

Regulatory Approvals for New Games

Despite these new regulations, the National Press and Publication Administration, China’s game publishing authority, has continued to approve new domestic and imported games. This suggests that while the regulatory environment is tightening, the gaming industry is still seeing new developments.

Adaptation and Future Prospects

UBS anticipates that the new regulations might affect newer games more than older ones. However, the gaming industry’s creativity and innovation could lead developers to find new ways to attract and retain users. This adaptability is crucial for the industry to thrive under the changing regulatory landscape.

 


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