Today afternoon, Hong Kong gaming stocks collectively fell. As of the close, NetEase fell more than 24%, Tencent Holdings fell more than 12%, and Bilibili fell more than 9%.
A-share gaming stocks also fell collectively in the afternoon, with Baotong Technology falling below the limit by 20cm, while Chinese Online, Zhangqu Technology, Kunlun Wanwei, Yaoji Technology, and Sanqi Interactive Entertainment all fell by more than 10% or were closed at the limit.
What happened?
Multiple stocks, including media and gaming stocks, have hit the limit down
In the afternoon, several game media ETFs also collectively fell, with game ETFs (159869), game and anime ETFs (516770), and game ETFs (516010) hitting the limit down. Game media ETFs, entertainment media ETFs, and others fell more than 6%.
According to the China Securities Journal, the media sector has been continuously active since the beginning of this year, especially since the end of October, becoming the strongest mainline under the catalysis of multiple events.
Analysts say that this year's media sector has both consumer and technological attributes. From the perspective of consumer attributes, this year's supply liberalization and offline demand recovery have brought about fundamental improvements. From the perspective of technological attributes, technological changes represented by AI bring about changes in downstream applications and an increase in sector valuations.
Great Wall Securities stated that the development of AI related applications can refer to the industry cycle of the past Internet wave, from "application expectations" to "application implementation", then to "application quantity", and finally to "application monetization". With the popularity of applications such as Pika, AI applications have maintained rapid iteration and development since the emergence of ChatGPT. In the future, the media industry will be the main sector to undertake downstream applications, with sub sectors such as games, advertising, publishing, and film and television expected to be empowered.
Currently, relevant game listed companies have responded to the above news. The staff of Dian Kaiying Network stated that the impact of the new regulations cannot be evaluated at present. Game recharge and advertising are both the main revenue of the company.
The new regulations in the gaming industry have caused a huge shock within the industry
On December 22nd, the website of the State Administration of Press and Publication released the "Draft Measures for the Administration of Online Games (hereinafter referred to as the" Measures "), which publicly solicited opinions from the society. It was mentioned that online games are not allowed to set up inducement rewards such as daily login, first recharge, and continuous recharge."; All online games must have a user recharge limit set.
The news has caused a huge shock within the industry. In the eyes of industry insiders, it is still a draft for soliciting opinions. However, if it is implemented, it will have a significant impact on the profitability of game companies. After the release of the "Measures" at noon, Hong Kong gaming stocks led by NetEase and Tencent plummeted significantly.
Specifically, in Chapter 3 of the "Measures" on the publication and operation of online games, it is mentioned that excessive use and high consumption of games should be restricted. Online games are not allowed to set up inducement rewards such as daily login, first recharge, and continuous recharge. Online game publishing and operation units shall not provide or condone high priced transactions of virtual props in the form of speculation, auction, etc. All online games must set a user recharge limit and make it public in their service rules. Pop up warnings and reminders should be given to users for irrational consumption behavior.
According to First Financial, regarding the ban on trading high-value props, a gaming industry insider stated, "Currently, some games have props ranging from tens of thousands to millions, but implementing these measures is no longer feasible."
The Measures also provide regulations for random sampling, stating that online game publishing and operating units should set reasonable sampling frequency and probability when providing random sampling services, and shall not induce online game users to consume excessively. At the same time, users should be provided with other ways to obtain virtual props and value-added services with the same performance, such as exchanging virtual props and purchasing them directly with online game coins.
Chapter 4 of the Measures emphasizes the protection of minors, stating that the restrictive requirements for providing paid services to minors should be strictly enforced, and the amount of consumption by minors of different age groups in using their services should be reasonably limited. Paid services that do not match their civil capacity should not be provided to minors; Random selection services shall not be provided to minors; Live streaming of online games shall not involve minors giving tips;
In addition, the Measures stipulate that those engaged in online game publishing activities must have the necessary technical equipment for engaging in online game publishing business, and related servers and storage devices must be stored within the territory of the People's Republic of China. The Measures specify that the scope of use of online game coins is limited to the exchange of online game products and services provided by oneself, and cannot be used for payment, purchase of physical goods, or exchange for products and services of other units; It is not allowed to provide users with the service of exchanging online game currency for legal tender.
The user base of Chinese games is 668 million people
At the recent annual meeting of the gaming industry, the newly released "2023 China Gaming Industry Report" showed that the actual sales revenue of the Chinese gaming market in 2023 was 302.964 billion yuan, an increase of 37.08 billion yuan, a year-on-year increase of 13.95%, breaking through the 300 billion mark for the first time.
In 2023, the number of game users in China reached 668 million, a year-on-year increase of 0.61%, reaching a new historical high. In 2023, the actual sales revenue of China's mobile gaming market was 226.86 billion yuan, an increase of 33.802 billion yuan, a year-on-year increase of 17.51%, setting a new record.
The "2023 Progress Report on the Protection of Minors in China's Game Industry" released at the same time shows that since the issuance of the "Notice on Further Strict Management and Effective Prevention of Minors from Addiction to Online Games" in August 2021, the anti addiction work in games has achieved significant results, with a 70% decrease in attention to the time limit for minors to play games, and the consumption of minors to play games has also maintained a downward trend.
According to the report data, in 2023, 15.41% of underage parents still encountered their children secretly recharging, more than 70% of parents' refund requests were processed, and nearly 40% of refund requests were fully refunded.
Multiple listed companies respond to the impact of new regulations
In the eyes of industry insiders, the new regulations for online games are still a draft for soliciting opinions, but if implemented, it will have a significant impact on game companies and will effectively affect their profitability.
A senior executive from a gaming company stated that the "no daily login allowed" rule in the draft for soliciting opinions has little impact on online game operations. It is worth noting the clauses that restrict recharging, which are not marked as only for minors. Therefore, it is likely to also impose restrictions on adult recharging. From the perspective of the article, it is still unclear whether it is the account limit or the ID card limit, and this part still needs further clarification.
Listed companies such as Yaoji Technology and Kaiying Network have responded to the potential impact of the new regulations on the company.
Yao Ji Technology staff stated that if the draft for soliciting opinions is approved, it is estimated that it will have a significant impact on the entire gaming sector and industry.
Kaiying Network staff stated that the impact of the new regulations cannot be evaluated at present. Game recharge and advertising are both the main revenue of the company.
Heartbeat Company stated that it will actively cooperate with the implementation of the new regulations. At the same time, the company also stated that its self-developed products have always adhered to a differentiated and high-quality research and development orientation, and have never relied on strong operational methods such as first charge rebates and daily check-in.
Shenzhou Taiyue responded to the Caixin News Agency reporter, "The impact on us is relatively small. Our gaming business is mainly focused on overseas sales, and the proportion of overseas revenue from games in 2022 has exceeded 85%. At the same time, the policy level continues to encourage cultural and gaming exports. In addition, the draft for soliciting opinions has just been released, and we still need to study and understand it deeply, and will actively participate in discussions on relevant opinions."
Fuchun Group stated on the interactive platform that if the "Draft Measures for the Management of Online Games (Draft for Comments)" are implemented, it will have a relatively small impact on the company's existing operational game products. In 2022, overseas revenue accounted for 88.59% of the company's gaming revenue.