Beijing cuts off gaming licenses' channel

Top News | Bloomberg and Tereza Cai 25 Oct 2018

China's regulators have ended the issuance of game licenses through a stopgap approval process, closing the last known official path for making money from new titles in the world's biggest gaming market, sources said.

Licenses are no longer being granted through a process known as the green channel - used for testing both domestic and foreign games.

The new restrictions in the US$38 billion (HK$296.4 billion) market threaten the fortunes of game companies such as Tencent and NetEase.

Tencent has lost about US$160 billion, or nearly 34 percent, in market value this year, more than any other company worldwide. Investment houses have lowered Tencent target price by as much as 16 percent.

The green channel, which allows games to have a one-month monetization testing, "acted as a relief for the entire industry," Tencent president Martin Lau Chi-ping has said. Only some large companies had access to the channel.

The latest domestic game approval list for March issued by regulators on the official website released in May permitted 727 games' operation and monetization. Since then, theoretically, there are no other new games allowed for making money.

Games - including online, mobile and console games - can only be freely tested in the mainland before getting the licenses.

Industry players have been seeking alternatives to counter the setback. The freeze has given rise to a gray market where Chinese gaming companies have been selling their publishing licenses for as much as 500,000 yuan (HK$564,675), said a source.

In addition, those games not compliant with the official standard also face risks of being stopped. In August, Tencent pulled back Monster Hunter: World just five days after it was released and refunded customers after it lost approval for failing to meet the official requirements.

China gamers have also flocked to Steam, an online platform where people can play unlicensed titles. The site, which is owned by Seattle-based Valve, has so far escaped the government crackdown.

The Scroll of Taiwu - based on Chinese mythology and Wuxia tales - which was released on September 21 and is not yet available in English, ranked 24th in Steam's list of global top sellers, reflecting the enormous rise of Chinese users.

While it is unclear why Beijing has shut the green channel, the government has stepped up its oversight of an industry it sees fomenting addiction, myopia and other ills among the country's youth.

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