China game licensing to gradually resume from next month

Chinese video game companies expect commercial approvals for new titles to gradually resume from next month, ending a nine month freeze which hit growth at internet giant Tencent and other publishers in the world’s biggest gaming market.

Chinese regulators stopped approving commercial licenses for games in late March of this year, as part of a government shake-up that folded the country’s top media regulator into the ruling Communist party’s propaganda department.

Feng Shixin, a senior propaganda department official, told a conference in the southern province of Hainan on Friday that a first batch of approvals for games had been completed, without specifying when publication licenses would be awarded.

Games company executives said they expected licencing to resume next month, but warned it would take officials months clear a backlog of more than 5,000 titles awaiting approval, and that there would likely be a significant tightening of game censorship.

Jerry Lin, vice-president of investment at 37 Interactive Entertainment, one of China’s largest listed games companies, said he expected to see some approvals granted before the lunar new year in February. “But there is not clarity on the pace,” he added.

“According to this announcement, we should see a small number of approvals before the lunar new year,” said a manager at Chinese games company Gamebar Inc, who asked not to be named.

Analysts at Citigroup said they expect a series of games will likely be released “gradually in the next couple of months”, but noted that “Due to the large volume of games, (Mr Feng) urged everyone to remain patient”.

The freeze on approvals has slowed revenue growth across the gaming sector, including at Tencent, China’s largest gaming company, which had lost more than $19bn from its market capitalisation in large part due to slowing games income.

Shares in Tencent surged 4.5 per cent following Mr Feng’s comments.

Beijing has grown increasingly vocal about the negative impact of gaming “addiction” on the country’s children. Tencent has sought to address this by capping the amount of time young people can play its games at two hours a day.

“I am more concerned about what the new rules and regulations will be, rather than when (approvals will resume),” said a senior executive at the gaming unit of one of China’s largest tech companies, who also predicted licensing resumptions from next month.

A newly-created games ethics committee run by the ruling Communist Party’s propaganda department has reviewed 20 new online video game titles, requesting changes to 11 titles and rejecting nine others, state media said this month.

The committee’s creation means that companies will have to “more aggressively tone down or remove elements such as excessive violence or gore, in order to receive a licence,” consultancy Niko Partners said in a report.

China’s games market, which is dominated by domestic companies, generated $30.8bn in sales this year according to Niko, split roughly evenly between PC and mobile phone games.

Additional reporting by Louise Lucas in Hong Kong