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Home / Technology / Will Tencent Rally as China's video game end the winter? – The Motley Fool

Will Tencent Rally as China's video game end the winter? – The Motley Fool



Chinese regulators suddenly suspended all approvals of new video games in early 2018, which led to the growth of the world's largest gaming market to hit a brick wall. The ban was mainly triggered by concerns about gambling addiction, video game violence, child myopia rates and a perceived need for tighter approval standards.

The prohibition hit Tencent (NASDAQOTH: TCEHY) ] particularly hard, since the Chinese tech giant generated about one-third of its revenue from online games. Tencent was forced to suspend Capcom s (NASDAQOTH: CCOEF) hit PC games Monster Hunter: World shortly after his Chinese release, while revenue recognition by PUBG Mobile and the PC versions of PUBG and Fortnite were left in limbo.

  Epic Games & # 39;

Epic Games & # 39; "Fortnite". Image source: Epic Games.

Tencent pushed out some new licensed games that were approved before the freezer, but the core fluid engine still ran on smoke. Tencent later restructured his business to derive funding for new games against his higher growth slots, digital media content, and payment services.

Many analysts expect "video game winters" to last until the first half of 2019. However, Chinese regulators recently started the gaming approval process in advance, and investors in Tencent and other gaming companies breathed a collective sigh of relief. But will new approvals finally help Tencent's stock – which shed over 20% of its value in 2018 – eventually recovering?

Understanding Tenent's gaming business

Tencent is the world's largest video game publisher with annual revenue. Its most famous titles include League of Legends Kings of Honor (also known as Arena of Valor ) and Clash of Clans [194590109] Clash of Clans]. Its efforts in Bluehole and Epic Games also provide the Chinese publishing rights to Battle Royale hits PUBG and Fortnite respectively. The consequence of the suspended gaming approvals has clearly marked its online gaming business over the last five quarters:

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Revenue (RMB)

26.8 billion

24.4 billion

28.8 billion

25.2 billion


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