China is known for establishing strict controls over civil society. Even if many times the news we receive is false or greatly exaggerated, that does not mean that their government is not very interventionist. It is. That’s why we are not surprised when we hear news that drafts of laws have been passed to establish very strong limits on what can and cannot be done with monetary mechanics in online video games. As a matter of fact, it has just happened.
The regulatory agency for the video game sector in China has just released a draft of its upcoming rules, as we have learned from Reuters, with very bad news for the major players in the industry. Its main measures are to reduce user spending on online video games, which directly affects monetization models. What does this mean? If this regulation were to be approved, speculation or auction of virtual items, rewards for daily logins, for spending money for the first time, or for spending money multiple times in a row would be prohibited. At the same time, minors would not be allowed to access reward mechanics based on probabilities, such as gachas.
The implications of this are evident. Being the Chinese market particularly large, and with two Chinese companies among the tech giants, it is logical that these changes would affect how mobile games with online functionalities are designed in general. Something that would have serious consequences for the industry as a whole.
In fact, even though it is only a draft, it has already severely affected the two major video game companies in the country. Tencent Holdings has fallen 12.35% in the local stock market, while NetEase has fallen 24.60%. This is particularly ironic considering that NetEase is the one that, over the past two years, has been diversifying its portfolio more visibly to avoid being so dependent on online games and their aggressive monetization. In any case, at the time of publication of this news, NetEase does not seem to have been affected so far in the US Nasdaq.
If this draft will be implemented is something that we still have to wait to know for sure. The Chinese government expects to receive comments on the regulation until January 22nd, so we won’t know more about this until at least the end of January. But in any case, if approved, this could mean a huge paradigm shift for the design of online video games. And their monetization.
