China is cracking down on new video games entering the country and it's costing publishing giants billions in profit

Tencent Honor of Kings.JPG

China is the world's largest video game market, but regulators in the country haven't approved any new games for sale since March 2018.
Chinese officials are reconsidering the impact gaming has on the country's young people, which could lead to limits on playtime and additional censorship.
Companies making games for Chinese audiences have reported more than $1 billion in lost sales due to the halt in approvals.

With about one-fifth of the world's total population, China is the largest video game market on the planet. Despite heavy regulations on media and online content in the country, Chinese gamers spent nearly $38 billion on video games in the past year, according to New Zoo.

But while China's audience for video games has seen consistent growth, officials in the country have expressed concern about potential gaming addiction and the impact video games have on the country's youth. As a result, Chinese regulators have slowed the approval process for new games in the country. The Wall Street Journal reports that less than 5,000 games have been approved so far this year, compared to more than 14,000 games released during 2017.

Approvals have primarily been reserved for major companies, and China is home to the biggest gaming company in the world, Tencent. However, Asia's largest company posted a decline in profits for the first time in more than a dozen years during August 2018, noting that Chinese regulators blocked the sale of major releases. Tencent's overall market value has tumbled more than $200 billion since peaking in January.

China's government is unapologetic about its efforts to monitor the release of new media in the country. There are strict limitations on the number of movies that are imported from the U.S. each year, and movies and games alike are deeply scrutinized for their portrayals of violence and offensive content. China overhauled its approval process in March 2018, establishing the State Administration of Press and Publication, but the new agency has been less than aggressive in addressing video games. Some Chinese officials believe the increased popularity of video games has had a negative impact on children, keeping them away from school and promoting addictive behavior.

Last year, in an effort to preempt new regulations, Tencent implemented oversight features for its most popular game, "Honor of Kings." The game automatically limits children under the age of 12 to one hour a day, adolescents between 12 to 18 are allowed two hours a day. Parents can also monitor the amount of time children spend playing and block their access to the game on specific devices. Tencent is now considering using facial recognition software to identify players by comparing their photo and information with a police database.

Mobile games dominate the Chinese video game market and the most popular games, like "Honor of Kings," earn more than a hundred millions dollars every month through microtransactions. Still, with the government reluctant to approve new games or allow monetization for popular titles, Tencent and other video game publishers are losing billions in potential revenue. The Wall Street Journal reports that gaming companies are currently losing as much as $200 million a month due to the lack of approvals.

Right now there are few signs that China is willing to expedite the approval process for video games and the issue raises a greater cultural question for Chinese officials. The country will eventually need to decide whether it wants to embrace video games as a growing part of the national culture, or continue to scrutinize the medium for possible negative influences. In the meantime, game developers will have to keep struggling to reach the world's largest market.

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