Young boys play the game
Chinese schoolchildren play the Tencent video game ‘Honour of Kings’. The industry has suffered from a government backlash on fears of gaming addiction © Reuters

Tencent has again failed to win approval for new video games after China’s top media regulator issued a list of 84 titles that omitted the industry leader for the second time in a fortnight.

The second batch of commercial licences follows a nine-month freeze triggered by a bureaucratic reshuffle that folded the media regulator into the Communist party’s propaganda department and a government backlash against fears of gaming addiction and its impact on children’s eyesight.

Last year’s hiatus pummelled Tencent’s share price, which shed a third of its value from a January peak. Tencent dominates the gaming market in China, which is the biggest in the world, and relied on the sector for 40 per cent of revenues in the three months to the end of September.

Shares perked up at the tail-end of the year ahead of the resumption in commercial licensing on December 29, when the State Administration of Press, Publication, Radio, Film and Television issued its first batch of approvals for 80 online games.

Shares were down 1 per cent in early morning trading on Thursday, roughly in line with the broader market. The company last year implemented measures aimed at limiting the time children and young adults spent gaming.

Chenyu Cui, senior analyst for gaming at IHSMarkit, attributed the absence of Tencent to the relative complexity of its games, such as those in the massively popular ‘ battle royale’ genre.

Netease, the second-biggest video game maker, also failed to have any of its games approved in the latest batch.

“The recently [approved] games are not hardcore games; the content is not so complicated so they can be reviewed more quickly,” said Ms Cui. “Recent Tencent and Netease games are more hardcore . . . so require more reviewing and censorship.”

Alicia Yap, analyst at Citibank, said the government may have been giving a leg-up to smaller studios that were feeling the squeeze by granting them approval first.

“Tencent and Netease still generate decent grossing from existing games and could afford to wait a bit more for new games approvals,” she wrote in a note to clients. “We do not view a ‘nil’ for the second time as a sign of any complication or potential hurdle for the two companies.”

Tencent declined to comment, while Netease could not be immediately reached for comment.

Analysts took heart from the swift set of second approvals. “SAPPRFT seems to have put in effort to speed up the approvals post the initial green light,” Ms Yap said.

Analysts reckon about 5,000 games were in the pipeline by the end of 2018.

Ms Cui estimated the backlog could take six months to clear, but said that could vary as a stream of new releases join the queue.

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