China’s Proposed Regulations on Online Games: A Comprehensive Overview

In a development there has been an announcement, by the National Press and Publication Administration of China (NPPA) on December 22 2023. They have introduced a draft guideline titled “Measures for the Administration of Online Games.” This comprehensive document consists of 8 chapters. Includes 64 articles. It aims to consolidate existing regulations while providing clarifications and amendments. Around 10 of these articles bring about changes in regulations marking a shift since restrictions were imposed on Chinese youth gamers back in September 2021.

One specific focus in the draft is Article 18 which aims to control spending and speculation in games. It states that games should not use reward systems that encourage users to overspend, such as offering in game rewards for logins or frequent purchases. Additionally the draft prohibits publishers from endorsing auctions for in game items. Publishers are also required to display pop up warnings to users who exceed a spending limit and set caps on in game expenditures although specific limits are not detailed in the draft.

The potential impact of these regulations regarding spending limits could be considerable as it primarily affects Average Revenue Per User (ARPU) games. Notably popular titles like Honor of Kings (Tencent) and Eggy Party (NetEase) may experience effects due, to their number of Daily Active Users (DAU) and low ARPU.
However game publishers face a challenge, in retaining and attracting users due to the lack of rewards for logins and ongoing purchases.

The response from both the industry and government to these regulations is crucial. Historical data shows that when there are changes in the gaming sector video game approvals tend to be put on hold. However after the draft release we saw a record breaking approval of 40 imported games and 105 domestic games in 2023. This indicates an inclination towards continuing to approve games, which demonstrates the governments commitment to fostering a gaming industry.

According to Niko Partners research the governments goal is to promote high quality development while addressing user concerns and rectifying business practices. The draft has prompted a response with the NPPA being open to industry feedback and recognizing the need, for revisions. It is worth noting that removing Feng Shixin, who oversaw the NPPAs Publishing Bureau has introduced an element of uncertainty into the landscape.

As we progress through the 30 day review period industry stakeholders are eagerly anticipating a revised version of the draft that incorporates feedback.

Throughout the year it has become clear that China is moving towards implementing policies, for the video game industry. It is expected that the final draft will address concerns related to Article 18 providing an understanding of how loot boxes, daily incentives and spending limits will be handled. Although the complete impact is yet to be determined games that heavily rely on these monetization methods may encounter obstacles in the changing landscape.

image by: www.slon.pics