Poor Q2 blamed on Chinese bureaucracy – a regulatory warning for anyone betting on China

Tencent saw profits fall in its Q2 results, for the first time in over a decade. With a key cause being the ongoing bureaucratic shakeup in the country, described as a ‘sector wide freeze for new game approvals’ which is preventing the company from launching new content and from monetising existing titles such as PUBG.

“From a revenue growth perspective, gaming is a key area of weakness, our biggest game is not monetizable,” Tencent president Martin Lau commented on a results call. “The only problem that we have is that one of our biggest games, PUBG Mobile, is not monetizing. This is something which is a little bit out of our control but over time we’ll solve it.”

Bloomberg reported that gaming revenue rose 30 per cent to 73.7bn yuan (£8.41bn), that sounds incredible, but that was actually the slowest rise since 2015 and fell short of estimates for 77.7bn yuan (£8.87bn).

Reuters reported that the company saw around $15bn (£11.8bn) wiped off its market value only the day before the results appeared. This was a direct results of Chinese regulators preventing it from selling Monster Hunter: World in the region, a game for which it had 1m pre-orders. The exact reasons for the ban haven’t been made clear, as Tencent said it had made appropriate changes to sell the game in China.

The South China Morning Post reported that no new games licenses had been issued since late March. If this continues then the impact on Tencent’s WeGame platform could be severe, with consumers inevitably finding ways to play the games on the grey-market through services such as Steam.

Tencent is planning to circumvent that, according to the Morning Post, by launching an international version of WeGame in Hong Kong, skirting Chinese censors, and so competing on a more even basis against US-based Steam.

With so many US and European game studios talking up China as their biggest growing sales region, these developments will be most concerning. 

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