China’s top content regulator, the General Administration of Press and Publications (GAPP), has asked local authorities to stop submitting requests to monetize new video games while it processes a backlog of applications built up after a lengthy pause last year.
The GAPP’s announcement indicated that the negative impact on gaming stocks could continue and reduced industry optimism that has been raised since late last year, by the recent resumption of approvals.
China stopped approving the monetization of new titles last March amid a regulatory body reshuffle triggered by growing criticism of games being violent and addictive, as well as concern over the increase in myopia among young people.
According to a GAPP report, the regulator approved 9,651 domestic and foreign online games in 2017 and approved 1,982 domestic and foreign online games during the period of January to March 2018, before the freeze. At the time it resumed approvals in December, it was estimated that there were at least 5,000 games awaiting approval.
Since resuming approvals in December, the GAPP says that it has approved 538 new games but it is severely backlogged. In China, game companies file applications to local authorities, which in turn submit them to the regulator, hence the GAPP’s announcement to regional authorities.
One gaming company representative said, “The regulator asked local authorities to stop submitting applications because there is too much of a backlog for it to deal with at the moment.” Game companies will still be able to file applications but they will no longer be passed on to the Beijing regulator while it deals with applications already in hand, said a second person.
Gaming firms such as Tencent — China’s most valuable listed company — were able to continue filing applications, building up a backlog. They could also distribute new titles but were unable to earn any income from them, such as through in-game purchases.
Tencent has seen the backlogged approval process decrease the value of shares in the company and it has wiped billions of dollars off its market value. Among titles for which Tencent is awaiting a license to monetize is “PlayerUnknown’s Battlegrounds Mobile,” which industry insider’s estimate could generate annual revenue of up to $1 billion.