What impact does the collapse of Tencent NetEase and other game companies have on game companies?

On December 22, the State Press and Publication Administration issued the Administrative Measures for Online Games (Draft for Comments) (hereinafter referred to as the Draft for Comments), which aims to strengthen the standardized management of the industry and promote high-quality sustainable development. The deadline for feedback is January 22, 2024.

There are 8 chapters and 64 articles in the Draft for Comments, of which Article 18 refers to "restricting the excessive use and high consumption of games", that is, online games cannot be set with inductive rewards such as daily login, first recharge, and continuous recharge. Online game publishing and operation units shall not provide or connive at high price transactions of virtual props in the form of speculation, auction, etc. All online games must set user recharge limits and publicize them in their service rules. Users' irrational consumption behavior should be reminded by pop-up warnings.

Although it is currently believed that the Draft has had a substantial impact on game companies. On December 22, as of noon, Tencent Holdings (0700) had fallen by more than 7%, NetEase (9999) by more than 12%, and Flying Fish Technology (1022), China Mobile (0302), Bilibili (9626), and Cardio (2400) had fallen by more than 5%.

After the opening in the afternoon, Hong Kong stock game companies continued to decline. As of press release, NetEase fell by more than 24%, and cardiac companies, Bilibili, Tencent Holdings, and China Mobile Games fell by more than 10%.

In terms of A-share, game shares also fell significantly in the afternoon. As of press release, Shengtian Network (300494) fell by more than 16%, Baotong Technology (300031) fell by more than 14%, Shenzhou Taiyue (300002), Zhangqu Technology (300315), Zitian Technology (300280) and other stocks fell by more than 11%, and Sanqi Mutual Entertainment (002555) and other stocks fell by the limit.

In fact, in a sense, if the Draft for Comments is implemented, players will gather in a really good game, which is also a kind of macro-control baton, and the goal is still to make the game high-quality. It can avoid irrational consumption and block the great social disputes that may exist in the game industry. In essence, it is to encourage game manufacturers to stick to users through innovative play methods and experience, rather than using marketing methods to channel users.

If the playing experience is good enough, why use some incentive means to "force" users to clock in? As a real "online red dot", players will live for a longer time. Some mainstream boutique games will not have this problem, mainly some shanzhai and skin swapping games, such as the proliferation of legendary games, which rely on routines to attract users and stimulate consumption, will be more vulnerable.

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