Mobile games in China range from League of Legends-like Honor of Kings to
Source: Apple Inc.
BEIJING – China's proposed rules would hit smaller developers harder than large ones, while reducing overall online advertising revenue, UBS said.
Tencent, NetEase And Bilibili Shares fell to their lowest level in more than a year on Friday after China's National Press and Publications Administration published draft rules that would ban encouraging daily sign-ups for games, among other revenue-generating practices.
The comment period is open until January 24. The markets in Hong Kong are closed on Mondays and Tuesdays for Christmas.
“Big game developers or big DAU [daily active user] Social games should do better: this is because they have other means to increase gamer engagement, reach users and have stronger R&D capabilities to attract and retain gamers,” said Kenneth Fong, head of China internet research at UBS, in a note.
“With lower revenues from online games, the advertising industry would also be affected,” he said. UBS estimates that online games represent approximately 20% of the online advertising industry's revenue.
Gaming accounts for the bulk of NetEase's revenue, and about a fifth or less at Tencent and Bilibili, according to third-quarter releases.
Many other companies develop and publish games in China, although Beijing has made clear in recent years that it wants to restrict game playing, especially among minors.
It's “very common” for online games to encourage daily logins and offer rewards for the first in-app purchase, UBS's Fong said. He pointed out that encouraging users to log in every day increases engagement and enables the collection of user statistics, allowing developers to customize games in real time.
However, Fong said it is difficult to quantify the financial impact of the proposed regulations because it is unclear whether it would apply only to new games or also to existing games.
The National Press and Publication Administration, which controls the publication of new games, said Monday it has approved more than 100 new domestic games, after saying Friday it had approved 40 imported games.
In general, Fong expects new games to be affected more than old ones. “Since the online game is a very creative industry,” he said, “we think the game developers would probably design other means to attract and retain users.”
