Tencent's shares down as China declines new game

Logo of Tencent is displayed at a news conference in Hong Kong China

Tencent said it would try to reinvigorate its mobile game revenue growth by extracting more value from existing popular titles, launching more role-playing games, and publishing more of its China-developed games internationally. Regulators have also been concerned about violence and gambling in some games, according to one person.

China's billion-strong population loves to game which is why it comes as no surprise China is the world's largest gaming market valued at $37.9 billion. Tencent responded by creating Wangzhe Rongyao, localized for the West as Honor of Kings (a mobile 5v5 MOBA) in 2015.

They could choose to continue playing but there would be no guarantee the service would continue, it said.

Lau said that interest accounted for a "low teens" percentage of revenue at its "others" business category which totaled 17.5 billion yuan in the June quarter, with the centralized deposit ratio raised to 52 percent in July from 42 percent in April. The National Radio and Television Administration has not granted licences for about four months, while the Ministry of Culture and Tourism has made game registration procedures more stringent, the people said.

A crackdown by the Chinese government on online content has also spilled over to gaming, with the industry accused of fostering addiction.

Shares of Tencent fell 3.6 per cent to HK$336 in Hong Kong before earnings were announced.

Tencent is part of a group of companies that have dominated the Internet in China.

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Tencent has added controls to how much young people can spend on its games and limited play time for those under 12, after People's Daily previous year compared Honour of Kings to "poison".

Company president Martin Lau said "the biggest issue" before Tencent could return to rapid revenue growth was to gain regulatory approval to start charging for its PlayerUnknowns' Battlegrounds (PUBG) video game in China, while confirming a sector-wide freeze for new game approvals in the world's largest gaming market due to a government restructuring. "The only problem that we have is that one of our biggest games, PUBG Mobile, is not monetizing".

All this has been undercutting Tencent's chief source of income. Mobile gaming revenue jumped 19% year-over-year, making for a sequential decline of 19%.

Still, Mr Yang of Blue Lotus voiced confidence the company would eventually begin getting government approvals again.

"For us this is a medium-to-longer-term holding with a history of good investment", he said.

Riot had brought these concerns to Tencent, but Tencent instead changed the game enough to sell as a standalone product with no similarities to League and became the most popular smartphone game in China by the end of 2017.

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