Games

Tencent drops $20 bln after China gaming rule change

Tencent’s market value slumped by around $20 billion on Friday after China intensified a crackdown on online gaming citing rising levels of myopia, heightening regulatory risks for companies in the world’s biggest gaming market. Ryan Brooks reports.

New moves by China to crack down on video games hit industry stocks hard on Friday (August 31).

China is the world’s biggest market for games and tech giant Tencent- one of the world’s biggest game companies- alone lost $20 billion dollars in value.

Beijing officials said they want to limit the number of new game releases because they’re worried about bad eyesight among young gamers.

It’s the latest change in the rules this year challenging Tencent. For months, Beijing’s frozen new game releases and the company recently posted its first fall in profit- in more than decade.

Investors responded: Tencent’s lost a staggering $164 billion dollars in value since January.

That’s bigger than the current market value of Netflix.

ROBYN MAK SAYING:

“So this latest crackdown is adding to worries that these regulatory setbacks are actually part of a wider campaign from Beijing to crackdown on the overall gaming sector in China. The regulatory risks are real, but its almost impossible to try to predict how serious they are going forward. So for the wider video games industry, China is still the largest market. especially for companies like Activision Blizzard and Nintendo. So a clampdown in terms of how many games are allowed to be released will hurt those companies too.”

Tencent rose to fortune on mobile hits like ‘Honor of Kings’ and publishing foreign blockbusters.

But this year, the new game freeze meant it missed out on big moneymakers like Fortnite – one of the summer’s hottest games.

ROBYN MAK SAYING:

“This shows just how dependent Tencent is on gaming. So the company has spent billions of dollars trying to build up its new businesses in cloud computing, video streaming, mobile payments etc. It’s still quite dependent for its core gaming business for its bottom line.”

Tencent also runs WeChat- China’s preferred social network with a billion users, but video games are nearly a third of its revenue.


Associated Links

  • Tencent Holdings
  • Netflix
  • Activision
  • Nintendo
  • World Wide Web
  • Economy of China
  • Nanshan District, Shenzhen
  • RSS
  • Tencent
  • Near-sightedness
  • Computing

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