Tencent lost about $20 billion in market valuation Friday, as Chinese regulators took steps to limit the number of online games and reduce screen time.
China’s leader, Xi Jinping, expressed concerns this week that game play was damaging children’s eyesight. His remarks telegraphed for tighter regulation over the number of online games and new titles released, limits on the time spent gaming and a rating system for age appropriateness.
The regulations come on top of a months long freeze in game approvals that casting a cloud of uncertainty over the world’s largest game market. The latest news hit Tencent like a rock, sending its shares tumbling on the Hong Kong Exchange.
There has been a gathering sense that the Chinese government would impose restrictions on video gaming, much as it has with other online content.
Last year, the state-run People’s Daily branded Tencent’s Honor of Kings mobile game as a “poison” on young minds, and so addictive that school children were ignoring homework and playing long into the night.
Tencent, which has benefitted richly from game play in recent years, saw regulators block the sale of a recent title, Monster Hunter: World, because it was considered too violent. The company also said it was having trouble getting licenses to make money on its new mobile games, including the popular South Korean game, PlayerUnknown’s Battlegrounds.
The tougher regulatory environment translated to a rare drop in net profit for the second quarter. Tencent has lost more than $160 billion in market capitalization since its high in January; according to Wall Street Journal calculations.
China has surpassed the United States as the world’s leading gaming market, by revenues and number of players. Researcher NewZoo estimates it will account for one-quarter of all global game revenue this year, or about $37.9 billion.
Mobile gaming is the dominant force, generating 61% of the revenue.