Online games is a huge part of Tencent’s business and accounts for nearly 40 percent of revenues. This has been a big growth driver and the Chinese firm has continued to bring popular hit games into the market. But it has faced a regulatory crackdown from Beijing which is stopping Tencent making money from games.
A mega-hit known as “PlayerUnknown’s Battlegrounds,” or PUBG, a massive multiplayer online game that Tencent has the rights to run in China, is waiting approval so the Chinese tech giant can monetize it. Another title called “Honor of Kings,” which is one of the highest-grossing mobile games in China, has also faced scrutiny. Last year, Tencent moved to put a limit on the amount of time children could spend on the game because of complaints from authorities that kids were becoming addicted.
And the latest issue came when regulators stopped Tencent from selling “Monster Hunter: World,” a popular online game created by Japanese gaming firm Capcom. Tencent has the license to sell it in China.
The result was that Tencent’s second-quarter earnings showed that smartphone game revenues had fallen 19 percent from the previous quarter. Daily active users increased but the amount of revenue it made did not because of the issues with monetization. It led to a surprise drop in profit for the first time in nearly 13 years.
But analysts are positive that the issue will be overcome shortly.
“The conference call, just concluded, was constructive and the company make clear that the regulation situation is temporary. Games with prior approval can be launched and monetized (15 games in Tencent’s pipeline are like this),” Campling said in a separate note.
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