China issues draft rules to regulate online video game sector; gaming firm stocks plummet

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China unveiled the new Draft Rules for online video games today, banning or amending several aspects concerning monetization and content, as part of their plan to regulate online gaming across the country.

Considering the actions of the Chinese government imposing multiple restrictions on video games since last year – including limiting game time for minors, age verification – this was on the cards.

This time around, the most affected parties are the online gaming companies. China houses some of the largest gaming firms across the world, including Tencent, which has a majority stake in several big gaming firms like Riot Games and Supercell.

The Draft Rules dictate various restrictions including a ban on daily login rewards that entice players to play a game daily, offering of probability-based luck draw features to minors, spending limits, among others. In other words, anything that makes kids spend money on video games has been imposed restrictions on.

Furthermore, online gaming companies are required to get approval for their games in case they have violent or inappropriate content. Similarly, regulators are to process the applications for new games or any other matter within 60 days.

Meanwhile, since the announcement of the Draft Rules, stocks of gaming firms have plummeted with Tencent witnessing over 15% drop while its rivals NetEase Games falling by 28%, Nexon by 8% and Bilibili by 6% as per Bloomberg.

The decision has been taken in order to combat gaming addiction among young people in China, which may be true to an extent as Chinese gamers have made multiple headlines, be it for spending money or time on online video games.

“This will deal a blow to the overwhelming majority of games in China, except those that sell copies. Companies will need to overhaul their monetization models, including how they charge money from different tiers of players,” said Zeng Xiaofeng, VP at Niko Partners.