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China has approved video game licenses for the first time since March 2018. The batch of 80 new games approved misses out on some major names. Chief among these names is Chinese internet giant Tencent Holdings, the largest gaming company on the planet.

Fears of Addiction and Decreased Productivity Led to Licensing Freeze

Chinese officials are reportedly concerned about how video games could impact children. They fear that children could get addicted to gaming. The hobby could also result in decreased productivity. Given these fears, China froze new releases in March 2018; the process for reviewing new games was reorganized. Recently 80 new video games obtained approval from China’s Online Game Ethics Committee, a newly formed approving body.

Tencent Missed Bus Despite Precautions

Responding to criticism in the country, Tencent had set mandatory age restrictions and time limits for its games. In September 2018, the company used facial recognition software for player identification. Tencent also used an official government database to match personal information and photos to confirm identities of players. It imposed a two-hour limit for players below 18, and a one-hour playing limit for those under 12. Yet, the gaming giant missed the bus when the Online Games Ethics Committee announced 80 new approvals.

Unfreezing Process Began in December

On December 21, a senior official gave a sign of things to come when he announced a gradual and controlled unfreezing process. The official acknowledged that many applications awaited approval. He added that the Chinese gaming regulator would do everything possible to greenlight titles at the earliest. In order to monetize their titles legally in China, studios would need licenses.

The government usually grants licenses on a first come first served basis. The earlier a studio files its application, the earlier it can expect approval. In 2019, only about 3,000 of 7,000 titles awaiting approval may be approved. The strict new licensing process has been reported by experts cited by China’s 21st Century Business Herald. Given the strict approval mechanism, the exclusion of Tencent and Netease, China’s two largest publishers of games, is unsurprising.

Hiatus Has Hurt Gaming Industry

The Beijing-based research firm GPC has reported that the world’s largest gaming market was registering slow growth. China’s official gaming association CNG acknowledged a year-on-year 5.4 percent growth in the first half of 2018. This was the slowest growth rate since 2008; the long hiatus in approval has led to the slashed earnings.

Tencent Among Companies Who Lost Most

WeChat, China’s popular messaging platform, is the brainchild of Tencent. However, the company relies for most of its revenues on gaming. Tencent owns several companies, including Supercell, Riot, Grinding Gear Games, and Activism. Thus, although gaming revenue has declined recently, the parent company continues to prosper. The company’s profits grew further, in 2012,. It took a 40 percent stake acquired in Epic Games that created the video game called Fortnite. Additionally, Tencent enjoys publishing deals or alliances with other firms. These include Square Enix, the company that introduced Tomb Raider to video gamers.

The fact that China has banned new video game titles has hurt Tencent’s revenue from gaming. The hiatus in the licensing process has caused a 4 percent decline in third-quarter earnings. Additionally, since January 2018, there has been a 30% drop in the share price of the company whose overall value has fallen by over $200 billion.

During 2018, China even banned some of Tencent’s games that had released worldwide with much success. Tencent were also not allowed to monetize such popular games as “PlayerUnknown’s Battlegrounds” and “Fortnite: Battle Royale” that enjoyed monthly subscriptions from millions of players.

Video Game Publishers Queue Up for Approvals

Regardless of the Chinese government’s restrictions, the country is still the world’s largest video game market. New Zoo reports that in China the industry garnered more than $34 billion from gamers in the last 12 months. The long-drawn freeze on video games is finally thawing. The massive population of players in China will attract publishers seeking to regain access to the huge market.

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