China regulators freeze approval of game licenses

China regulators freeze approval of game licenses

Riot Games relationship with its parent company Tencent has reportedly been strained over declining profits and mobile games, according to a report by The Information. Tencent shares are down 6.67% following the results. The iShares China Large-Cap ETF shed 3.8% to a 13-month low, as 49 of the 50 components lost ground.

While Tencent's shares fell by 3.9 percent, it isn't just the Chinese video game market that is devastated by the freeze. Tencent had been counting on new games like the survival-themed "Fortnite" and "PlayerUnknowns' Battlegrounds" to revive growth in the People's Republic.

China's biggest social networking and gaming company said it's seeking to reinvigorate mobile game revenue growth, via deepening engagement with existing titles and potential global monetization opportunities.

What happened: A stock price tumble wiped out over $15 billion in Tencent's market value amid concerns about its gaming revenue.

"A lot of games have not been approved", said Lau, adding that the government was aware "the restructuring is now affecting the industry as a whole".

Now it has been a while since this the regulator took this step and by now some of the major companies in the Chinese Gaming Industry alongside worldwide companies, have started to feel the heat. Lau said this showed the regulators' goodwill.

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There was better performance by the company's digital content activities, which span music distribution, video streaming and online books. Tencent is also ploughing cash to outside bets: the value of new investments hit 32 billion yuan in the six months to June.

Still, it's rare for company officials to publicly suggest Beijing is to blame for anything, which is why it stood out that Tencent called out government actions for its profit weakness, said Asia Society senior fellow Isaac Stone Fish. Of that, the revenue from PC games was CNY31.5 billion, a first-time decline, while mobile game income rose 13 percent from a year earlier, but this was a big drop from last year's increase of almost 50 percent. Daily transaction volume was up 40 per cent in the quarter.

"The major disappointment was the top line, and that's on top of estimates being hugely guided down from about a month ago", said Billy Leung, an analyst with Haitong International Securities Hong Kong.

Gaming for now remains its bread and butter.

A Chinese central bank initiative that is expected to raise the centralized deposit ratio requirement for payment service providers to 100 percent in the near future - thus eroding their interest income - continues to adversely affects Tencent's payment business revenue and gross margins, it said.

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