On December 22, the State Press and Publication Administration issued the "Measures for the Administration of Online Games (Draft for Comments)" (hereinafter referred to as the "Draft for Comments") to solicit opinions from the public. The deadline for feedback is January 22, 2024. The "Draft for Comments" places restrictions on behaviors such as buying and selling licenses, inducing payments, and gameplay designs such as forcing players to fight. The protection of minors is more stringent. In-game advertising business models, mini-program games, etc. are also included in the regulatory framework, triggering heated discussions in the industry.
Some people in the industry believe that this draft regulates the game industry in almost all aspects. If it is implemented according to the current text, game companies will face pain. On that day, A-shares and Hong Kong-listed game stocks collectively suffered a heavy decline. Among them, the two major game giants Tencent and NetEase lost HK$360 billion and HK$128.4 billion in market value respectively in one day.
In this regard, some experts said, "The consultation draft is not a formal approach, and the market does not need to be overly nervous." Many listed game companies have also responded. Because each company's specific business and focus are different, the impact assessment of this draft is also different.
Game recharges also have to be "limited" and gold-based games may be impacted
The "Draft for Comments" released this time contains 8 chapters and 64 articles. Among them, the restrictions on recharge are considered by the outside world to be the regulation that has the greatest impact on game manufacturers.
Specifically, Article 18 mentions "restricting excessive use of games and high consumption", that is, online games are not allowed to set inductive rewards such as daily login, first-time recharge, continuous recharge, etc.; online game publishing and operating units are not allowed to provide or condone high-priced transactions of virtual props in the form of speculation, auctions, etc.; all online games must set user recharge limits and publicize them in their service rules, and pop-up warnings should be provided to users for irrational consumption behavior.
In terms of "Promotion and Promotion Standards for Online Games," Article 29 of the "Draft for Comments" mentions that online game live broadcasts are not allowed to have high rewards. Regarding the protection of minors, the "Draft for Comments" proposes eight regulations, including that minors are not allowed to reward online game live broadcasts.
In terms of game currency transaction specifications, the "Draft for Comments" also mentions that real-name digital RMB wallets should be used for online game currency transactions; the same enterprise shall not operate online game currency issuance and online game currency transaction services at the same time.
Regulations such as recharge limits are directly linked to the revenue of some game companies. Many people in the industry believe that if implemented according to the current text, it will cause a blow to krypton gold games. Self-media "Liu Dian" said that the "Draft for Comments" involves a large amount of content that weakens the "krypton gold" attribute of games. In the future, game companies will need to redesign a more reasonable profit model. However, for the development of the industry, this will help the game return from a "money-making machine" to the "ninth art". Game companies must shift from how to promote payment to how to improve the content of the game itself.
Another regulation with greater impact is Article 27: When providing random drawing services, online game publishing business units should make reasonable settings for the number of draws and probabilities, and must not induce excessive consumption by online game users. At the same time, users should be provided with other ways to obtain virtual props and value-added services with the same performance, such as virtual prop exchange and direct purchase using online game currency.
Liu Dian believes that the addition of this content will have a great impact on the card drawing game. The probability is okay, but it is mandatory to provide purchase slots when drawing cards. On the one hand, it will affect the game experience of drawing cards. On the other hand, it will also greatly reduce the revenue generated by game companies through drawing cards.
In addition, the "Draft for Comments" also clearly stipulates that online game publishing and operating units are not allowed to set up forced battles in online games; any unit or individual is prohibited from buying, selling, or applying version numbers; game publishing and operating units should go online within one year of obtaining the version number, which means that game manufacturers will not be able to hoard version numbers, and the scheduling space for new game products may become smaller.
According to the official website of the National Press and Publication Administration, in order to strengthen industry standard management and promote high-quality and sustainable development, the "Online Game Management Measures (Draft for Comments)" has been drafted.
Gaming stocks collectively plummeted, with the latest responses from many listed companies
After the "Draft for Comments" was released, it sparked heated discussions. In the capital market, A-share and H-share game stocks fell sharply. As of the close of trading on December 22, Gigabyte, Perfect World, Giant Network, Sanqi Interactive Entertainment, Century Huatong and other stocks had dropped to the limit. In terms of Hong Kong stocks, NetEase closed down 24.6%, Xindong Company, China Mobile Games, and Tencent all fell by more than 10%, and Bilibili, iDreamSky and others fell by more than 7%.
On the same day, a number of listed game companies responded to the "Draft for Comments". Zhang Wei, vice president of Tencent Games, said that the new management measures draft has no essential changes to the game’s business model, operating rhythm and other key elements. The regulatory authorities have issued a draft of new management measures to fully solicit opinions from the industry and society, which is believed to be more conducive to the orderly and healthy development of the gaming industry.
Zhang Wei revealed, "Since the release of the new unguaranteed regulations in 2021, Tencent has been strictly implementing management requirements. Currently, the game duration and consumption data of minors are at historically low levels." Tencent's financial report shows that in Q1 this year, minors' game duration and revenue accounted for only 0.4% of the total game time and 0.7% of the total revenue in Tencent's local market, which were down 96% and 90% respectively from the same period three years ago.
According to Oriental Finance, regarding the "Draft for Comments", the official customer service of NetEase's "Danzi Party" stated that "it is currently in a stage of soliciting opinions, and it is not a final version that will take effect, so it has not yet been officially implemented." The first deposit will be subject to the prompts given by the system.
Xindong Company stated that its self-developed products have always adhered to the orientation of differentiated and high-quality research and development, and never relied on strong operating methods such as first deposit rebates and daily sign-ins. The company will fully implement the spirit of the new regulations and specific measures to jointly promote the healthy development of the industry.
According to the Financial Associated Press, Kaiying Network staff said that the impact of the new regulations cannot yet be evaluated. Game recharges and advertising are the company's main revenue sources. Yaoji Technology staff said that if the draft is passed, it is expected to have a great impact on the entire game sector and industry. The company should study the details and then follow up on relevant countermeasures.
It is worth noting that some game companies that focus on going overseas have said that the new draft regulations will have little impact on them. Article 51 of the "Draft for Comments" also proposes to encourage online game publishing business units to explore overseas markets, strengthen international cooperation in online games, promote international cultural exchanges, and enhance the international influence of Chinese culture.
Among them, Shengtian Network stated on the interactive platform that from the perspective of business structure, about 30% of the company's 23H1 revenue structure comes from the game sector. In the game sector, due to the higher share ratio in overseas regions, overseas game revenue accounts for close to 70%. The implementation of the new regulations is expected to have limited impact on the company's overall business.
Fuchun said on the interactive platform, "If the "Management Measures" are implemented, it will have little impact on the company's existing operating game products. In 2022, overseas revenue will account for 88.59% of the company's game revenue."
Shenzhou Taiyue also told the media, "The impact on us is relatively small. Our game business is mainly overseas, and the proportion of overseas game revenue in 2022 has exceeded 85%."