Chinese tech giant Tencent (腾讯), the world’s largest game distributor, announced on September 10 that it would 'kill' its popular poker game “Texas Hold’Em”.
Although the company cited "a change in business" as the reason behind the surprise decision, industry observers believe that the game became the latest victim of the heightened industry scrutiny by the Chinese government since early this year.
In a statement on their official WeChat account, Tencent said it would close the game's server and clear all cached data from September 25. Existing players would be financially compensated in accordance with the regulations of the Ministry of Culture and Tourism guidelines, the statement added.
In the future, Chinese game providers may face a 35% tax on every game product, a Guangzhou-based newspaper Southern Metropolis Daily (南方都市报) reported on September 5.
Crackdown on video games forces Chinese companies to adjust
In a bid to curb the rising number of myopic youngsters in China, the government on August 30 announced plans to limit the time spent by young players on video games and electronic gadgets.
In response to the plan, Tencent was forced to roll out a slew of measures to restrict the time spent by gamers on "King of Glory", its blockbuster game.
One such measure is the real-name authentication system with advanced technology that identifies young players and sorts them under the firm’s anti-addiction mechanism. Those who play beyond the allotted period are forced to go offline, the company explained.
Moreover, when China’s regulators froze approval of game licenses in early August, Tencent posted a statement on WeGame's website, declaring that its blockbuster video game “Monster Hunter: World” was no longer being sold because the game contents did not meet regulatory requirements.
The big game contributor also revealed that Chinese regulators have begun to stop all new video-game approvals since the end of March. Only 15 of its online games were approved while several smash hits, such as “Fortnite” were awaiting the authorities’ nod.
Distributors hammered by heightened surveillance
The small and medium-sized game distributors in China will bear the maximum brunt of the stringent regulations.
Pei Pei, the chief analyst of Sinolink Securities (国金证券), a Chinese securities brokerage company explained that if the government increases controls over the number of online games releases, large companies may cushion the effect riding on the strength of their resources. But the small and medium-sized firms may be forced to sell new products to the big companies for survival.
He Sai, an analyst with Huatai Financial Holdings (华泰金融控股), the financial unit of the leading integrated securities group Huatai Securities (华泰证券), observed, “Tightened rules will help leading game corporations to further expand their market share. In the long term, large game distributors like Tencent will confront less competition, but small and medium-sized won't be able to survive the onslaught.”
But that does not mean that the giants are completely immune. Last month, Tencent posted its first decline in quarterly profit in 13 years. According to its Q2 2018 financial report, the net income fell to CNY 17.9 billion (USD 2.62 billion) in the quarter ending June 30, and the mobile-game business saw a decline of 19% to CNY 17.6 billion (USD 2.57 billion) from the previous quarter. The company’s market value too slumped by around USD 20 billion in one day.
Tencent said the profit decline and market value drop were directly connected to changes in government policies which blocked its new game assets from releasing and monetizing.
Pressed by the crackdown, an increasing number of Chinese game companies are looking at foreign shores for survival. Tencent, for example, led a USD 100 million Series D round in Indian gaming company Dream 11 in September this year, CNBC reported.
Experts believe that if the conditions at home continue to remain hostile, such a trend will only increase.