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 Sohu.com, 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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