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China freezes all game license approvals

16 August, 2018, 09:16 | Author: Tara Roberts
  • A weaker yuan makes Chinese exports cheaper cushioning the impact of the tariffs imposed by US President Donald Trump

Tencent's weaker-than-expected results came a day after investors wiped around $15 billion off its market value on news that Chinese regulators had blocked it from charging for of one of its blockbuster titles, "Monster Hunter: World". The interesting parts of it are the details about Riot's declining playerbase and Tencent's own pursuit of mobile gaming, which have supposedly caused both companies to butt heads a couple of times in the past. Worryingly, revenue from online games, which ring in more than a third of the total, grew at a tepid 6% year-on-year. "For new game approvals, there will continue to be a drag", she said. The explanation cited alleged customer complaints.

The poor result punctuates an abrupt about-face in sentiment this year as Beijing chilled the world's largest gaming arena. Desktop titles have been in decline as gamers move to smartphones.

One potentially promising area is payments, where monthly active users stood at 800 million as of June.

Tencent is reportedly now more interested in the burgeoning battle royale genre, holding stakes in both Fortnite and Unreal Engine 4 maker Epic Games and Playerunknown's Battlegrounds firms Bluehole and PUBG Corp.

The company is diversifying by building up advertising, video and music streaming. But costs are ballooning, while margins are much lower than in the company's core gaming operation.

However, operating profit for Tencent's second quarter dropped by 3 percent year-on-year to 21.8 billion yuan (~$3.14 billion), but for the six month period this increased by 25 percent to 52.5 billion yuan (~$7.57 billion).

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The world's largest videogame company said its net income last quarter fell 2% from a year ago-the first such year-over-year decline it has recorded since 2005.

The company expects measures to "reinvigorate" its mobile game revenue growth to take "several months to take effect", according to its filing. For all its heft, though, gaming remains essential for Tencent's bottom line. Adjusted earnings per share were 2.06 yuan, compared with the prediction for about two yuan.

"The key here is, not only PUBG, but no games are able to get licenses now", a person from Tencent told Reuters on Tuesday on condition of anonymity due to the sensitivity of the matter. The freeze follows a reorganisation of the government bodies that oversee gaming and other media sectors earlier in the year.

While Tencent's shares fell by 3.9 percent, it isn't just the Chinese video game market that is devastated by the freeze.

League numbers are down from their peak, but it's still one of the most-played games in the world and we're very happy with the numbers, and we think some of the new content we're putting out soon can only help with player numbers.

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