China's online game version number approval "restart", the industry's prospects are still not optimistic

Last Friday (8th),the State Press and Publication Administration finally re-approved the game version number, and 45 games were approved on the list. Since July last year, the mainland Chinese government has not approved any "game version number" for nearly 260 days; the share prices of online game giants such as Tencent and NetEase have been severely hit, and 14,000 online game-related companies have closed down.

The games approved this time include “Party Star” from Tianjin Electronics, “Youth Three Kingdoms: Pocket Battle” from Youzu Network, and “Tower Hunter” from Thunder Network.

However, compared with the number of games approved each month in the past, the number of version numbers approved in April is still relatively small. There were 87 edition numbers issued in July last year, with an average of 80 to 100 per month. Considering this batch of applications since September, it can be seen that the official approval of the game is still rigorous.

U.S.-listed Chinese stocks NetEase and Bilibili rose 8 percent and 8.6 percent, respectively, in premarket trading on Monday. However, Hong Kong stocks rose slightly, while A-shares quickly fell after a short-term rise. Some companies' share prices were even lower than before. According to the analysis of Chinese game media "Touch Music" , although the overall prosperity of the game industry is expected to pick up, it remains to be seen whether the market can maintain confidence in the long-term. The challenges include the stagnant growth of the game population and the low number of license approvals.

Regarding the stock price performance, Zhang Yi, CEO of iiMedia Research Consulting, believes that after the restart of the version number, the industry can enter the direction of compliance development, but the market will not have an immediate effect. He continued that in the case of a small number of editions, game companies may face a more intense "competition".

"Reuters" quoted sources that although the approval of the version number this time is not within the industry's expectations, the industry has been continuously adjusting the company's operating methods and game design since last year, in order to avoid being accused of non-compliance. Chenyu Cui, a senior analyst at media research firm Omedia, said last year's gaming restrictions were "the strictest in history" and that "every company is afraid of not complying with the rules."

President Xi Jinping said during the National People's Congress in March last year, "Not only is it a problem of addiction to online games, but there are also many dirty things on the Internet. Minors are immature in their psychological development and are easily affected by adverse effects. These problems are of a social nature. The problem requires the joint efforts of all sectors of society and relevant departments to study and solve it.”

After suspending the approval of version numbers in July, the Chinese government issued the "Notice on Further Strict Management and Effectively Preventing Minors from Indulging in Online Games" in August, introducing a series of new restrictions on the use of games, including requiring gamers to register with their real names, and 18 Teenagers under the age of 1 can only play games from 8 to 9 pm on holidays, Fridays, Saturdays and Sundays, that is, only 3 to 4 hours per week . opium". The new measure is stricter than the 2019 ban on underage teenagers from playing games after 10pm every day. However, the South China Morning Post reported that many teenagers, with the help of their parents, were able to find ways around the official gaming restriction order.

"Radio Free Asia" reported that after the re-approval of the account number, mainland Chinese netizens were hotly discussing "Should we continue to smoke 'spiritual opium'?" There was also a discussion about whether the authorities "couldn't stand up" the pressure of the people, so that people from all over the world were "blocked and controlled". ” to pass the time and reopen the approval.

There are also views that the authorities’ move this time is due to the profitability of the game industry. In 2020, the total profit of the online game industry recorded approximately RMB 280 million. "Haixi Morning Post" published an article stating that "the impact of the stagnation of version number issuance on game companies is self-evident", indicating that small and medium-sized enterprises in the industry are very dependent on version numbers, and many companies can only invest or borrow during the suspension period. remain operational, with the expectation that this restart will improve their survival and industry prospects.

There are no game products from Tencent and NetEase in the list, which is a cause for concern. Teng Hua, general manager of Gamma Data, told the "Yangcheng Evening News" that this may be related to the order of applications. Another point of view points out that the two giants should already have a lot of version numbers, and there is no need to seize this empty window.

People familiar with the matter said that Tencent had asked the studio to remove English words and avoid using red and sensitive words such as "headshot" and "death" in games. The studio has also delayed releasing the game internationally for fear of being seen by authorities as circumventing domestic regulations.

Two other people familiar with the matter said that online game companies can still submit game applications during the period when the authorities suspend the approval of the version number, and receive frequent requests from the authorities to modify the content and profit model. Many game development plans have been reduced in size and budget due to the pressure of strict approval, or even cut in half; many online game companies, including Tencent, have laid off staff to save money.

In September last year, Reuters reported that the state-run Game Alliance had held a training program for online game developers, aimed at emphasizing the need for online games to have "correct values" and no religious elements. Daniel Ahmad, a senior analyst at data analysis firm Niko Partners, pointed out that there are now more than 5,000 game companies joining the game prevention system in China, and many of them have been investigated and fined by relevant law enforcement agencies. Tencent, NetEase and 200 online game companies also announced in September last year that they would voluntarily crack down on game addiction.

The State Press and Publication Administration did not respond to Reuters' queries.

Greg Pilarowski, director of law firm Pillar Legal, said that many small online game companies in mainland China are considering turning to the blockchain game market, which is popular in Europe and the United States. "The current environment in China poses great challenges for online game companies." However, It also means they need to give up the Chinese mainland market.

Source of information:

1. Approval information for domestic online games in April 2022 (National Press and Publication Administration)
2. After the game version number is issued, what happens to the stock of the listed company? (touch music)
3. China gaming firms toe the line, paving the way to end licence freeze (Reuters)
4. Notice of the State Press and Publication Administration on Further Strict Management and Effectively Preventing Minors from Indulging in Online Games (General Office of the State Council)
5. Micro Lens · General Secretary Xi Jinping's "League Group" "Let's jointly care about these educational issues" (Ministry of Education of the People's Republic of China)
6. "Spiritual opium" has grown into an industry of hundreds of billions! "No industry, no competition can develop in a way that destroys a generation" (Economic Information Daily)
7. The Chinese game version number has been suspended for more than 9 months and restarted. Netizens: Do you want to continue smoking spiritual opium? (Radio Free Asia)
8. The domestic game version number is restarted after 8 months, and Xiamen's game industry welcomes new development opportunities (Haixi Morning News)
9. The game version number restarted after more than 8 months, why did Tencent and NetEase have no game? (Yangcheng Evening News)
10. China vs video games: why Beijing stopped short of a gaming ban, keeping Tencent and NetEase growing crack amiddown (SCMP)