×

Tencent, NetEase Shut Out Again in New Batch of Games Approved by China

Chinese regulators Tuesday issued a new list of online games approved for release, but the country’s two biggest gaming companies were once again shut out, stoking concerns of prolonged troubles for the industry’s top players.

Neither NetEase nor Tencent had products on the list of 93 new games granted licenses by the State Administration of Press, Publication, Radio Film and TV. Instead, smaller rivals got the green light. This is only the third such batch of approvals since authorities in December ended a freeze that lasted the majority of last year.

“It’s certainly rather surprising that [Netease and Tencent] haven’t been included yet,” said Daniel Ahmad, an analyst at Niko Partners, a consulting firm focused on Asian gaming. But he added that there is “nothing at this point to suggest they are being singled out or that their games won’t ultimately be approved.”

Most likely, analysts say, approvals are being granted simply in “first come, first served” order, based on when the games were submitted.

China is the world’s largest gaming market, with 620 million gamers who last year spent some $37.9 billion on online games, according to market research company Newzoo. That didn’t stop authorities from putting the industry on ice last March amid an administrative restructuring and a push to curb violent content and gaming addiction. Early last month, the country also established an “ethics committee” to vet online gaming content.

The freeze has prevented Tencent from being able to make money off its most popular games in China, including “Fortnite” and the South Korean battle royale-type game “PlayerUnknown’s Battlegrounds.” The tech company, which produces and distributes its own games as well as those from other companies, saw its stock-market valuation tumble by billions of dollars at one point last year. On Tuesday, shares fell nearly 2%.

China has thus far approved just 257 games since December, among them 238 mobile games, 18 PC games, and one console game. The number is a drastic downturn from past years: In January 2017, it approved 716, Reuters said.

It will take regulators a long time to work through a backlog of more than 7,000 games, Newzoo financial analyst Michiel Buijsman told Variety. Authorities have confirmed that they plan to process around 3,000 games in 2019, although in years past, they were able to get through between 7,000 and 8,000, Buijsman said.

“Given the current speed of new game approval, the backlog of games waiting for licensing, and the government’s stricter control over game content, we estimate it could take two to three years before the Chinese games industry stabilizes,” Buijsman said.

Impact of the freeze on consumer spending has so far been “relatively minor,” he said, as Chinese users were able to continue playing approved games. But many gaming companies were forced to lay off employees, and smaller studios lacking the robust pipelines of their larger competitors have had to shut down entirely.

The small companies that survived were the ones able to bring their games overseas to the wider Asia market, Ahmad said. Nevertheless, “consolidation will be one of the big things of 2019.”

Though the resumption of approvals was a “huge relief” for the industry, Ahmad estimated that it would take regulators about six months to clear out the backlog from last year. He anticipates that the PC games market won’t rebound until 2020, but that mobile will begin to recover as soon as this year “just because of how much momentum there still is” in the sector.

An unnamed NetEase exec told Reuters that Tencent and NetEase would likely have to wait until after the Chinese New Year holiday that concludes Feb. 10 to see any movement on their approvals.

Neither company replied to Variety’s requests for comment.

Popular on Variety

More Gaming

  • Scopely founders

    Mobile-Games Company Scopely Raises $200 Million From Chernin Group, Advance

    Scopely, a mobile-games developer, announced an additional $200 million as part of its Series D funding round from Advance, whose holdings include Condé Nast, and Peter Chernin’s The Chernin Group (TCG). The new funding doubles the size of the original $200 million Series D round Scopely announced last fall and brings the company to over [...]

  • Games to Get Lost in

    The Best Video Games to Get Lost in While Self-Isolating

    “Animal Crossing: New Horizons” finally released on Friday, giving players the opportunity to travel to an island paradise and build a community there. For gamers with fairly different tastes, on that same day, “Doom: Eternal” also debuted, allowing those at home to battle through the demonic forces of hell. Either way, it’s an escape. And for [...]

  • Activision-Blizzard-Overwatch-League-Grand-Finals-2018

    Overwatch League Cancels All March, April Events Due to Coronavirus

    The Overwatch League has cut all of its events through March and April, another major cancellation in gaming and esports as the industry grapples with COVID-19 (coronavirus). Activision Blizzard announced the move with a statement on Wednesday, the same day the World Health Organization declared coronavirus a global pandemic. The publisher said it’s monitoring “city-level [...]

  • E3 2019

    E3 2020 Canceled After 'Overwhelming Concerns' About Coronavirus

    E3 organizers, bowing to the inevitable, announced that this year’s video-games conference scheduled for June in L.A. has been canceled because of the ongoing coronavirus epidemic. Last year’s Electronic Entertainment Expo, better known as E3, drew 66,100 attendees. The 2020 gaming showcase had been scheduled to run June 9-11 at the Los Angeles Convention Center [...]

  • Jeff Sagansky Harry Sloan

    Jeff Sagansky, Harry Sloan Partner on $600 Million IPO

    Veteran Hollywood executives Jeff Sagansky and Harry Sloan are launching Flying Eagle Acquisition Corp. with a $600 million initial public offering. It’s the sixth public acquisition vehicle since 2011 launched by Sagansky and Sloan. These kind of acquisition companies have gained in popularity in recent years as a means for investors to participate in new [...]

More From Our Brands

Access exclusive content