China’s proposed gaming rules put smaller game developers at risk

China’s Gaming Rules: Shares of gaming giants Tencent, NetEase, and Bilibili experienced significant declines following the publication of the proposed regulations.

China’s proposed gaming regulations may disproportionately affect smaller developers over larger counterparts, along with causing a fall in overall online advertising revenue, according to analysis by UBS which was revealed as part of a report by CNBC on Wednesday.

Shares of gaming giants Tencent, NetEase, and Bilibili declined following the publication of the proposed regulations. The new rules include the prohibition of incentivising daily sign-ins for games and other revenue-generating practices.

UBS suggests that larger game developers and those with substantial daily active user (DAU) social games, such as Tencent, are better positioned to weather the regulatory storm.

These industry leaders have diverse means to engage gamers, reach users effectively, and boast robust research and development capabilities. However, smaller developers which rely on incentivising daily sign-ins and similar strategies may face more significant challenges.

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UBS estimates that online games contribute to around 20% of the online advertising industry’s revenue, making them susceptible to the regulatory impact.

UBS’s Kenneth Fong noted that while the regulations might affect new games more than old ones, the creative nature of the gaming industry suggests developers will likely devise alternative strategies to attract and retain users.