China steps up scrutiny of online mobile games

Bloomberg

China is stepping up its scrutiny of online and mobile games, as the leading government-owned newspaper blasted Tencent Holdings Ltd.’s top-grossing Honour of Kings for harming children in the pursuit of profit.
The People’s Daily criticized Tencent’s most profitable smartphone title in an editorial, citing it as an example of how addictive games spread “negative energy” and have even led to deaths. The harshly worded opinion piece came after China’s biggest messaging and games company declared curbs on playing time for the minors among the title’s estimated 100 million-plus monthly active users.
Video gaming remains at the core of Tencent, which is known for creating the all-purpose WeChat messaging service that’s become a facet of daily Chinese life. The self-developed Honour of Kings has grown into a money-spinner, a consistent chart-topper on Apple and Google app charts that’s expected to account for more than half Tencent’s smartphone gaming revenue this year. Shares in the company, the biggest component of Hong Kong’s Hang Seng, slid as much as 5.1 percent on Tuesday, its biggest intraday fall in over a year. The benchmark index fell 1.6 percent.
“Whether they entertain the masses or hurt lives, when it comes to earning money versus the potential for harm, we have to be even more wary,” the newspaper, considered the mouthpiece of the ruling Communist Party, wrote.
Tencent, with its one billion plus active users, has become one of China’s largest corporations with dominant positions in social media and entertainment, areas that draw central government scrutiny. Government media and sociologists have also been critical of games since the era of internet cafes, stoked by reports of deaths after marathon gaming sessions.
Echoing their arguments, the People’s Daily said game addiction warped traditional social values. The newspaper also carried a commentary on curbing game addiction from Legal Evening News, which said Tencent hasn’t done enough.
Honour of Kings is a hack-and-slash game in the same vein as League of Legends, also from Tencent. The company cited it as one of the key titles that helped boost mobile gaming revenue 57 percent in the first quarter, and Thomas Chong, an analyst at BOC International, has estimated that Honour of Kings will contribute more than 50 percent of Tencent’s smartphone game revenue this year.
The game’s universal popularity means the latest government push in China shouldn’t have a major impact on Tencent’s revenue in the longer run, said Marie Sun, an analyst with Morningstar Investment Service.
“The demand is there and people will continue to play Tencent’s video games, so I don’t think the impact will be significant,” she said. “Honour of Kings has a diversified player base, not only primary or middle school students. There are a lot of older players who will continue playing. And even players who are of a younger age will figure out ways to keep playing the games.”
Tencent did not respond to emailed questions but, in an interview posted on its official WeChat account, Honour of Kings producer Li Min said it was working on a system to protect juveniles from addiction. People aged 12 and below will be limited to playing an hour a day and banned from the game after 9 pm, while those aged 13 to 18 will be limited to playing the game for 2 hours daily.