China puts more pressure on gaming companies

Chinese regulators summoned gaming companies including Tencent Holdings and NetEase to discuss further oversight of the industry and the need to de-emphasise profits, prompting a steep share sell-off.

Tencent, the country’s largest gaming company, dived as much as 6.7%, on track for its biggest fall since July, while smaller rival NetEase fell as much as 7.7%.

The publicity department of the Communist Party of China’s Central Committee, the National Press and Publication Administration and two other agencies called the meeting to convey plans to step up supervision and start checks on illegal behaviour, according to the state-run Xinhua News Agency. The government just last week released new regulations for the industry, including limiting the amount of time children can play video games to three hours a week.

The agencies told the companies they must enforce the new regulations and break from “the solitary focus of pursuing profit” to prevent minors from becoming addicted to games. They should also remove “obscene and violent content” and avoid “unhealthy tendencies, such as money-worship and effeminacy”.

“The authorities ordered the enterprises and platforms to tighten examination of the contents of their games,” Xinhua said. “The platforms must also resist unfair competition to prevent excessive market concentration or even monopolies in the industry.”

Chinese gaming stocks listed in the US tumbled, with Bilibili sliding 5.9%. The Nasdaq Golden Dragon China Index slumped 3.3%. NetEase said it will comply with anti-addiction regulations and promote more quality games for minors.

“We believe in healthy game play and take very seriously the physical and mental health of minors,” Tencent said. “We appreciate the guidance and instruction from the relevant regulators, and will work hard to be in full compliance with all rules relating to youth game addiction and content regulation.”

Here are key points mentioned by Xinhua:

• The gaming companies were asked to “profoundly understand the importance and urgency of preventing minors from online game addiction”. They were urged to implement rules aimed at “boosting youth development”.
• The companies were asked to “fully and faithfully impose the time limit on underage gamers and [were] banned from providing online game account trading services for minors”.
• They were ordered to step up the examination of games’ content, including removing obscene and violent content and avoid “money-worship and effeminacy”.
• The companies were asked to end “the solitary focus of pursuing profit or attracting fans and other erroneous tendencies, and change game rules and designs inducing addictions”.
• They are supposed to restrict celebrity endorsements in game advertising.
• The companies were asked “to place stricter management on the services of livestreaming games, including banning large rewards and rewards from minors”.

Bloomberg News. More stories like this are available on bloomberg.com