Tencent has finally won approval for a new game. There is symbolism here. Beijing froze all game licensing last year. Now the government is signalling a limited easing of its tough stance on tech.
Investors should not read too much into this. The Chinese gaming giant still has a long way to go before it can claim to have made a comeback.
Tencent and its biggest local rival NetEase received approvals to launch new paid games for the first time in more than a year. Chinese game regulators ignored the duo in granting more than 240 approvals for new titles in recent months. In China, game companies need regulatory approvals to monetise new games.
Other risks are abating. The Hong Kong listing of Tencent Music, the music streaming unit in which Tencent has a 50 per cent stake, could come as early as next week. That secondary listing would raise money and protect investors from the loss of a public trading venue. The US may delist 240 Chinese companies under new US accounting laws.
Stronger medicine would be needed to revive ailing shares. Tencent’s modest healthcare game was just one of many awaiting approval. It has little chance of becoming a blockbuster. There is a risk slow approval processes become the norm, as reviews of content become stricter.
Playing time restrictions remain unchanged. For minors, this is limited to just three hours a week, from 8pm to 9pm on Fridays, Saturdays and Sundays. In-game spending is directly correlated to playing time.
About a third of Tencent’s total revenue comes from gaming. Domestic titles still account for most of that. Tencent has accelerated overseas expansion in an effort to hedge domestic risks. In the second quarter, revenue from both domestic and international games fell, reflecting the lack of new titles.
Tencent shares are down a third this year. A revenue drop in the latest quarter marked the first quarterly contraction since Tencent listed in 2004. The business remains highly politicised. Games companies outside China’s sphere of influence remain a better bet.
Tencent: Chinese giant needs more than one game approval to flourish Republished from Source https://www.ft.com/content/26ebebcb-70c6-49d3-ae80-7101274cf58e via https://www.ft.com/companies/technology?format=rss