China continues to put pressure on the country’s games industry by proposing a new set of restrictive regulations. However, the government has already approved a new batch of video games, also saying it is open to feedback from local companies.

China approves 105 new domestic games, including NetEase's extraction shooter Firefly Assault

Firefly Assault

What happened?

On December 22, the National Press and Public Administration (NPPA) published a draft set of rules aimed at curbing practices that encourage players to spend more money and time on online games.

Below are the key proposals (via Reuters):

  • Limiting the amount of money a player can spend in the game;
  • Banning companies from giving players rewards for logging into the game every day and for making in-app purchases (e.g. for their first-ever purchase or for multiple purchases in a row);
  • Prohibiting developers from offering probability-based lucky draw features (loot boxes, gacha-based mechanics, etc.) to minors;
  • Prohibiting the use of speculation and the auction of virtual in-game items:
  • Requiring game publishers to store their servers within China.

“The removal of these incentives is likely to reduce daily active users and in-app revenue, and could eventually force publishers to fundamentally overhaul their game design and monetisation strategies,” Morningstar analyst Ivan Su told Reuters.

The NPPA is now seeking feedback from Chinese game companies by January 222, 2024.

As a result, the country’s tech giants lost roughly $80 billion in market value on Friday. Tencent saw its shares plunge 16% (the biggest drop since 2008), while NetEase shares fell 28% (a record drop in the company’s history).

According to Lightstream Research analyst Mio Kato, “this is the beginning of the end for the current mobile gaming business model.” He also noted that this move could force other countries to take similar measures against mobile games.

What is happening with game approvals in China?

  • Despite announcing new restrictions, the NPPA licensed 40 new games from foreign developers/publishers, bringing the total number of imported titles approved this year to 98.
  • On December 25, the regulator went even further and approved 105 new domestic games, including Tencent’s Counter War: Future and NetEase’s Firefly Assault (the shooter’s global version is called Lost Light).
  • This means the government doesn’t want to impose another licensing crackdown after ending a 263-day freeze in 2022.
  • In addition, the NPPA plans to speed up the licensing process. If the new rules come into force, publishers will have to wait no longer than 60 days to get their games approved by the government. For comparison, right now even the biggest companies have to wait for months to receive a license.
  • Overall, the NPPA approved 1,075 games in 2023, including 977 from domestic and 98 from foreign developers.

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