The recent proposal of gaming rules by China’s National Press and Publication Administration has sent shockwaves through the gaming industry. While these rules aim to regulate and control game play, it is clear that they may have unintended consequences for smaller developers and the overall online advertising revenue. This article examines the potential impact of these rules and analyzes how it may affect different stakeholders in the gaming industry.
Following the publication of the draft rules, major gaming companies such as Tencent, NetEase, and Bilibili experienced a significant decline in their shares. This drop is attributed to the potential ban on revenue-generating practices, including incentivizing daily sign-ins for games. The market reaction indicates that investors perceive smaller developers to be more vulnerable to these regulations compared to larger, established companies.
Smaller developers, who heavily rely on revenue generated from online games, are expected to be hit the hardest by the proposed rules. Unlike big game developers with substantial resources, smaller developers may lack the means to boost gamer engagement, reach out to users, and enhance their research and development capabilities. Consequently, the proposed regulations could place these smaller developers at a significant disadvantage, potentially stifling their growth and innovation.
Implications for Online Advertising Revenue
It is estimated that online games contribute approximately 20% of the online advertising industry’s revenue. With the potential decrease in revenue from online games, the entire advertising industry would be impacted. This would be a significant blow to companies that heavily rely on advertising as a source of income. The proposed rules may lead to a decline in online ad revenue, forcing companies to find alternative sources of advertising or explore new business models.
The Dominance of Gaming in Revenue Streams
For companies such as NetEase, gaming accounts for the majority of their revenue. In contrast, Tencent and Bilibili generate about one-fifth or less of their revenue from gaming. The proposed regulations could disproportionately affect companies heavily reliant on gaming as their primary revenue stream. These companies may need to diversify their revenue sources to mitigate the potential financial impact of the proposed rules.
Incentivizing daily sign-ins and offering rewards for in-app purchases is a common practice in the gaming industry. These strategies help boost user engagement and allow developers to collect valuable user statistics for real-time game adjustments. If the proposed regulations ban or limit these revenue-generating practices, it may hinder user engagement and disrupt the development of games. The long-term consequences on game quality and user experience remain uncertain.
While it is still unclear whether the proposed regulations would apply only to new games or existing ones as well, the impact on the gaming industry is expected to be significant. Smaller developers may face greater challenges in adapting to these regulations compared to larger, established companies. The decline in online game revenue could have ripple effects on the advertising industry. Overall, the proposed rules demand careful consideration of their potential consequences and their effects on the future of the gaming industry in China.
Leave a Reply