Bank: Turbulent times for China’s video game sector
September 7, 2021
By Chris Forrester
The enthusiasm for video games and gaming shows no signs of fading. Industry data shows that global stock market growth for the games sector was up 3.6 per cent last week. Even the more modest indicator from Morgan Stanley (the MSCI World) Index showed growth for the week of 1 per cent.
But there could be bad news ahead. Investment bank Exane/BNPP says that Toshiba has warned that a continued shortage of semi-conductor chips will affect console makers.
Also affecting the sector is news that China’s JD.com is withdrawing sales of 87 games including Activision-Blizzard’s Call of Duty and Nintendo’s Animal Crossing: New Horizon because they were not approved for sale.
The bank says that JD.com, one of China’s largest e-commerce platforms which also hosts third-party sellers, issued the notice on September 2nd. The games can no longer be sold on JD.com’s marketplace, and the company will manage this closely, it said, adding it planned to apply “high pressure” on the issue.
The bank suggests that while it is – as yet – unclear what has prompted the clamp-down, it would appear that new rules issued by Chinese regulators restricting young people under the age of 18 from playing online games more than three hours a week to curb gaming addictions.
Video games need approval from Chinese regulators before they are able to be sold in the world’s largest video games market. However, players can sometimes get titles on the grey market via third-party sellers on e-commerce platforms, says Exane/BNPP.
The bank’s report adds: “Chinese authorities’ restriction on video game has been escalating in recent weeks with new measures to curb youth gamers video game use. We don’t have official data but we doubt unapproved games represent material net booking contribution for any of major Western publishers. Most of the revenues generated come from approved games which are operated by local partners (Tencent or Netease most of the time). While the financial impact will likely be very limited, it weights once again on sentiment.”