Video Game Stocks Slide As Beijing Imposes 3-Hours-Per-Week Playtime-Quota for Those Under 18

Video Game Stocks Slide As Beijing Imposes 3-Hours-Per-Week Playtime-Quota 

BY TYLER DURDEN MONDAY, AUG 30, 2021 - 10:15 AM 

Four weeks after Chinese regulators first denounced video games as "spiritual opium" and identified "video game addiction" as a widespread phenomenon distracting young people from their responsibilities, authorities on Monday announced they would restrict the hours during which Chinese minors are allowed to play. From here on out, gaming during the week will be banned. On Friday evenings, as well as during holidays and Saturdays and Sundays, gamers will only be allowed to play during a single hour between 2000 to 2100 local time.

Already, Monday’s new rules are impacting shares of China's online gaming companies. Shares of a swath of companies, including Tencent, NetEase, Bilibili, Kingsoft Cloud, Huya and, tumbled during Asian trading.

The new restrictions on video games are merely the latest installment in China's efforts to curb the power of Big Tech. The crackdowns have already wiped more than one-trillion dollars off of the combined market cap of Chinese firms trading in China, the US and Hong Kong.

Other Chinese large-cap companies like Alibaba were higher on the day.

"Tencent, NetEase and other online games companies in China may experience merely a modest hit to financial performance from the tightening of time restrictions on minors time spent playing games to three hours per week," said Bloomberg Intelligence analysts Matthew Kanterman and Tiffany Tam in a note to clients. Education stocks are also climbing Monday after Morgan Stanley said it sees opportunities in the sector with New Oriental Education up 10%, Tal Education up 8.5% and Gaotu Techedu, up more than 4%.

What's more alarming than the restrictions themselves is how Beijing intends to enforce them, with facial recognition technology and requirements for gamers to use verified accounts.

One twitter user wondered if other countries might follow in China's footsteps with new footsteps.

Chinese President Xi Jinping has also publicly spoken out about the perils of youth gaming addiction, remarks that have put more pressure on officials to act.

After the new regulations were published on Monday following the close of trading in Shanghai, Tencent said it had introduced a variety of new functions to better protect minors. It vowed to continue to do so as it "strictly abides by and actively implements the latest requirements from Chinese authorities."

Tencent backs some of the biggest video game producers in the industry, and has invested in “Fortnite” maker Epic Games and “World of Warcraft” creator Activision Blizzard.

In 2018, China stopped issuing video game licenses for almost nine months amid similar concerns, costing Tencent more than $1 billion in lost sales, according to analyst estimates, and leading to a prolonged slump in its share prices. In 2019, Beijing banned users younger than 18 from playing videogames between the hours of  2200 and 0800, while also restricting them from playing more than 90 minutes of video games on weekdays. 

Tencent President Martin Lau warned during an earnings call earlier this month that regulators were focused on limiting the amount of time and money that minors devote to online gaming.

These remarks also show the video-game crackdown isn't unexpected. Beijing has sought to curb video gaming among teenagers since 2017.


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