The release of the "Measures for the Administration of Online Games (Draft for Solicitation of Comments)" led to a collective decline in game stocks, and NetEase-S fell by more than 27%

Source: Visual China

On the afternoon of December 22, Hong Kong game stocks suffered heavy losses, especially NetEase-S (09999.HK), which fell more than 27% intraday, hitting a new low since January 4 this year, at HK$116.1.

Although the stock price rebounded in the afternoon, it still fell by more than 20%, as of press time, NetEase-S share price was HK$119.6, down 26.08%, with a turnover of HK$4.552 billion, and the current total market value of the company is about HK$385.545 billion.

In addition, including Tencent Holdings (00700. HK), CMGE (00302. HK), IGG (00799.HK), Bilibili-W (09626.HK), NetDragon (00777.HK) HK), XD Company (902400. HK) and other game concept stocks have shown a sharp downward trend, with declines mostly within 10%-20%.

The main reason is that at noon today, the National Press and Publication Administration issued the "Measures for the Administration of Online Games (Draft for Solicitation of Comments)" (hereinafter referred to as the "Draft"), and solicited opinions from the public.

According to the Draft Opinions, online games are not allowed to set inducing rewards such as daily login, first recharge, and continuous recharge. Online game publishing business units must not provide or condone high-priced transactions of virtual props through methods such as speculation or auctions. All online games must set user recharge limits and publicize them in their service rules, and pop-up warnings should be given to users' irrational consumption behaviors.

According to the Draft Opinions, when providing random selection services, online game publishing business units should reasonably set the number and probability of drawing, and must not induce online game users to consume excessively. At the same time, users should be provided with other ways to obtain virtual props and value-added services with the same performance, such as exchanging virtual props and using online game currency to purchase directly.

Source: National Press and Publication Administration

When engaging in online game currency issuance activities, the purpose of maliciously occupying users' advance payments must not be allowed, and the standards for issuing and purchasing online game currency should be transparent and reasonable. Users shall not be provided with services for exchanging online game currency for legal tender, unless the online game publishing business unit terminates the provision of online game products and services, and refunds the online game currency that has not been used by the user in the form of legal tender or other methods accepted by the user.

The Draft Opinion clarifies that there shall be no high-value tipping in the live broadcast of online games, and there shall be no tipping by minors. When online game operations units terminate the publication or operation of online games, they should make an announcement at least 60 days in advance. It shall be refunded to the user in legal tender or in other ways acceptable to the user according to the proportion of the user's purchase.

In addition, those engaged in online game publishing activities must have the necessary technical equipment necessary to engage in online game publishing business, and the relevant servers and storage equipment must be stored within the territory of the People's Republic of China.

With the release of the "Opinion Draft", it was first reflected in the secondary market, and related game concept stocks showed a collective downward trend. For game developers and operators, if the new rules are implemented, they may need to adjust their game's business model to avoid the above-mentioned prohibited marketing strategies, and may also cause their revenue to be affected in the short term.

In this regard, the market generally expects that after regulatory changes such as the slowdown in the approval of version numbers and the total control of games, the introduction of the draft for comments means that the industry will be reshuffled again in the future.

It is worth mentioning that the "adjustment" of the game industry at the national level seems to have been followed for a long time. On December 4 this year, the National Press and Publication Administration released the approval information of domestic online games in November, a total of 87 games were approved, and 87 products have applied for mobile version numbers, including NetEase-S's "Beyond the World", Zhongqingbao's "Ant Clan War", "Contract Battle Song", "Seal of Mitheus" and other games are listed.

According to past data, the end of each month is the time when the National Press and Publication Administration releases the approval information of domestic online games for the month. The postponement of the game version in November undoubtedly made investors think "Is the game field going to usher in a big move?", and the impact on the entire game industry at that time was mainly based on the sharp drop in stock prices.

Titanium Media APP learned that since the beginning of the year, the National Press and Publication Administration has issued a total of 930 game version numbers (including 58 imported games), the number has exceeded 579 in 2022 and 748 in 2021, and the number is expected to reach 1,000, which is close to the expectations of many institutions earlier. (This article was first published on the Titanium Media APP, author: Chen Weina)