Tencent [0700:HK] reportedly is cutting the marketing budget for its games department as the Chinese government imposes game industry-related regulations, which freeze the approval of new game publications, according to Sina on November 9. In addition, Tencent will also lower the budget of under-performing games, or postpone the release of these games until next year. Funds not yet allocated to gaming projects will be returned to the company. The company refused the media’s request for comment.
The government’s recent regulations on the game industry negatively impacted Chinese major video game companies such as Tencent, and NetEase [NTES:US]. The purpose of the increased regulation is to reduce video game addictions as well as decrease the worsening rates of myopia among children and young people. Specifically, in October, it was reported that China’s regulators suspended issuing licenses for new games through a temporary channel known as the green channel. Both Tencent's and NetEase’s revenue and stock have subsequently tumbled, as the regulation might slow the release schedule of new blockbuster titles.