Tech UPTechnologyRestrictions on playing video games in China hit Tencent

Restrictions on playing video games in China hit Tencent

Tencent, one of the largest and most important technology companies in China, recorded a revenue decline of 3% in the second quarter of the year compared to 2021, due to the economic slowdown, the resurgence of Covid-19 cases and the strong regulations of your government towards video games.

Between April and June of this year, the company obtained revenues of 19.78 billion dollars and, in addition to reducing its 2021 figures, it did not meet the analysts’ specifications in a period in which the government made large closures to important financial cities, like Shanghai, under its “Covid zero” policy.

Tighter regulations in the domestic video game industry, where Tencent is one of the main competitors, have also presented him with problems. Legislation was passed last year requiring children under the age of 18 to spend a maximum of three hours a week playing online titles during specific times.

Furthermore, between July 2021 and April this year, regulators froze the approval and publication of new titles. Since then, regulators must give permission for games that are released and monetized.

Although the company has very popular games, such as League of Legends, in the second quarter it only published three mobile games, which also reduced its revenue by 1% both in China and in the international market. One of the cases that attracted the most attention in this fall was that of PUBG Mobile.

Tencent explained that although during the pandemic there were many people who decided to play, after the reopening that has changed and for this reason the international game market “experienced a period of digestion” after the health emergency, coupled with the fact that there are fewer game launches. important games, lower user spending and higher regulations in the case of the local market.

The president of Tencent, Martin Lau, stressed that despite the poor results in the video game division, they are hopeful that the situation will normalize in the near future, after they receive new and more licenses to publish titles.

The video game vertical was not the only one affected within the technology company, as online advertising revenue fell 18% compared to the previous year. However, the Fintech and Business Services segment, which includes its mobile payment service WeChat Pay and its cloud computing business, rose 1% year-on-year to $6.224 billion.

“Fintech revenue growth was slower relative to previous quarters as the resurgence of Covid-19 temporarily impacted merchant payment activities in April and May,” the company explained, but they expect business to pick up. in line with the Chinese economy.

For the next few quarters, the company will implement a “cost control” strategy to reduce expenses and return profit growth, even if revenues do not increase.

Separately, the company also reported its first drop in workforce in nearly a decade. According to their figures, at the end of June, the company employed 4.7% fewer workers than at the end of March. This is the first cut in staff since 2014.

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