China’s Proposed Gaming Rules Could Impact Small Developers and Online Advertising Revenue
BEIJING — The mobile gaming industry in China, home to popular games like Honor of Kings, is facing potential regulatory impacts that could hit smaller developers and affect overall online advertising revenue.
According to UBS, China’s proposed gaming rules would have a larger negative impact on smaller developers compared to larger ones. The rules, which are currently in the draft stage and open for public comment until Jan. 24, would prohibit certain revenue-generating practices such as incentivizing daily sign-ins for games.
As a result of the proposed regulations, shares of major gaming companies Tencent, NetEase, and Bilibili plummeted to their lowest levels in more than a year. The rules have raised concerns about the potential reduction in online advertising revenue, with UBS estimating that online games currently account for about 20% of the industry’s revenue.
Kenneth Fong, head of China internet research at UBS, noted that larger game developers with strong user engagement and R&D capabilities are expected to fare better under the proposed rules. However, the potential financial impact remains uncertain, as it is unclear whether the regulations would apply to existing games or only new ones.
While the National Press and Publication Administration approved more than 100 new domestic games, the potential regulatory changes could have a significant impact on the industry, particularly for new games. Fong expressed optimism that game developers would find ways to adapt to the changes and continue to attract and retain users.
The gaming industry plays a significant role in China’s tech sector, and any regulatory changes could have far-reaching implications for developers, players, and advertisers. As the comment period for the proposed rules continues, stakeholders in the gaming and advertising industries will be closely monitoring the potential impact of the regulations.