Title: China’s Proposed Gaming Regulations to Impact Smaller Developers, Online Advertising Revenue
China’s gaming industry is bracing for major changes as the government proposes new regulations that are expected to have a significant impact on smaller developers and online advertising revenue, according to financial services firm UBS.
Online games currently contribute approximately 20% of the online advertising industry’s revenue, making them a vital source of income. However, UBS estimates that China’s proposed gaming regulations could reduce this revenue stream as developers face stricter regulations and limitations.
While big game developers with strong user engagement, reach, and research capabilities are likely to fare better, smaller developers could struggle to comply with the new rules. This could lead to a consolidation within the industry, favoring larger players such as NetEase, Tencent, and Bilibili.
NetEase, in particular, heavily relies on gaming for its revenue, while Tencent and Bilibili generate a smaller proportion from the gaming sector. The proposed regulations may pose challenges for these companies as they look to adapt their business strategies accordingly.
Underlying Beijing’s desire to restrict game play, especially among minors, is a concern over addiction and the impact on young people’s mental health. To combat this, incentivizing daily sign-ins and offering rewards for in-app purchases have become common practices among online games, boosting engagement and collecting user statistics.
The financial impact of the proposed regulations remains uncertain, as it is unclear whether they will apply to both new and existing games. However, UBS expects new games to be affected more than old ones. Game developers are expected to seek alternative ways to attract and retain users in the face of these potential restrictions.
In related news, the National Press and Publication Administration recently approved over 100 new domestic games and 40 imported games. This indicates that the government remains open to the development and entry of new gaming content in the market, despite the proposed regulations.
As the gaming industry eagerly awaits further details regarding the regulations, developers and industry players will need to prepare for potential disruptions and explore innovative strategies to navigate these changing dynamics.