China is implementing new regulatory measures aimed at curbing consumer spending within video games, a move that has significant implications for the gaming industry.
As reported by Reuters, the National Press and Publication Administration released a new set of draft rules aimed at the monetization and engagement tactics used by companies in online games, with the intention of regulation how much money a player can spend in-game. These rules also include restrictions on reward systems such as daily log-in bonuses and consecutive spending incentives.
The proposed regulations have led to a dramatic decline in the market value of Tencent and NetEase, two of the largest video game publishers in the world. Shares of Tencent, the world’s largest video game publisher, and its rival NetEase plummeted, wiping billions off their market values. This regulatory move is part of China’s ongoing efforts to combat gaming addiction and to regulate the online gaming environment more stringently. In recent years, the government has implemented various restrictions, including limiting gaming time for minors and imposing a freeze on new game licenses.
The new rules will prohibit common features in certain games. For instance, games can no longer allow to offer rewards for first-time spenders or for spending money several times consecutively. Additionally, this bans selling of loot boxes to minors and the auctioning of in-game items. Games will also be required to limit how much money the users can add to digital wallets and must run all their servers for Chinese games within China’s borders. Publishers will need to process game approvals within 60 days, which could provide some relief to the industry that has seen a slowdown in game approvals in recent years.
The latest set of regulations target key drivers of mobile gaming profitability. The best example are daily login rewards, which help encourage habitual behavior and incentivize players to invest more time and money in games. The draft is also suggesting a blanket ban on trading and auctioning of expensive aesthetic items, significantly impacting how most free-to-play games work. These games, while free to log in and enjoy, often rely on microtransactions and gacha events to convert free players into paying users.
While the proposed regulations don’t ban microtransactions, they impose a limit on the amount players can spend on a game within a specific period. This approach could potentially lead to a system where spending over a set amount helps grant access to all paid content, including future updates. Such a system would align with consumer protection and ensure that players are not excessively monetized.
The regulatory changes come amid growing concerns about the psychological impact of gaming. This kind of approach could serve as a model for others to use in balancing the enjoyment of gaming with the need to protect consumers from potentially exploitative practices.
The draft rules have sparked a debate among investors and industry analysts about the potential impact on revenue or user engagement. Some analysts believe that the rules, if implemented, could significantly affect revenue streams for gaming companies. Others see it as a necessary step to address issues such as gaming addiction and the ethical implications of in-game monetization.
As China continues to regulate gaming, the rest of the world is paying close attention. The country may eventually influence how other nations address similar concerns in their gaming markets. The proposed changes underscore the need for a balanced approach to gaming that considers both the enjoyment of players and the responsibility of game developers and publishers to promote healthy gaming habits.
