China

Is China’s new limit on video games a big deal for its gaming sector?

Not really.

A group of young people in masks playing video games.

In-game spending from Chinese gamers under 18 only captures a fraction of gaming companies' revenue.

Photo: Bertha Wang/AFP via Getty Images

Seemingly every piece of internet regulation the Chinese government has come out with in recent months has become an international headliner. Beijing's recent move to dramatically cut down the amount of time for children to play online games has done the same, and even inspired American parents to institute stricter screen-time control at home. But analysts say the immediate impact is minimal.

On the last day of summer break in China, the country's National Press and Publication Administration declared that those under 18 will only be allowed to play games up to three hours a week — specifically, between 8 p.m. and 9 p.m. on Friday, Saturday and Sunday. China's ultra-strict limits on video games came after the recent revisions to the Minors Protection Law went into effect in June, and they synchronize with other rules aimed at preventing Chinese youth internet addiction.

It's all bad news for kids, at least in their eyes. But Chinese gaming powerhouses probably won't miss their underage players a great deal. The new limits aim primarily at free-to-play mobile games whose monetization strategies are based mostly on in-game microtransactions. But in-game spending by players under 18 only comprises a tiny fraction of gaming company revenue in China.

Tencent, the world's largest gaming company by revenue, has revealed in its earnings reports that during the second quarter of 2021, gamers under age 16 contributed just 2.6% to Tencent's in-game revenue (down from 3.2% in Q4 2020), and players under 12 accounted for just 0.3%. NetEase, China's second-largest gaming company, sees less than 1% of its revenue from gamers under 18, CEO and founder William Ding revealed in the company's quarterly earnings call on Tuesday. Across the market, spending by underage gamers only makes up between 1% and 5% of Chinese gaming companies' in-game purchases, according to Daniel Ahmad, senior analyst at Niko Partners, a gaming consultancy focused on Asia.

"They will not have much impact to these companies' ongoing strategy and goals," Daniel Camilo, formerly a business developer for Shenzhen-based game publisher APPTUTTi, told Protocol.

Investors have shrugged off the potential impact of Beijing's new restrictions, evident in the quick rebound of share prices of Tencent and NetEase following the announcement of the new policy. If anything, a rigid rule like this — specifying the exact time slots allowed for minors to play games — precludes gaming companies from going to the trouble of self-regulation based on political speculation, something big tech companies often have to do these days. "Gaming companies now have a clear idea about how to comply going forward," Chundi Zhang, gaming analyst at the London-based research firm Ampere Analysis, told Protocol.

The reason why the share of spending from minors is so small is that China's gaming regulators have been trying since as early as 2005 to get rid of what they believe is the scourge of gaming addiction among minors. In 2019, China's National Press and Publication Administration introduced regulations that already significantly limited the amount of time that gamers under 18 could engage with games.

Though the financial impact from the 2021 time limits on video games is soft, they will likely further diminish the in-game spending from underage players — and gaming companies will likely see engagement numbers dip. China is home to the world's largest gamer population. Official government data shows that 62.5% of minors who have access to the internet, or about 114 million young gamers, often play online. "Even if a game only profits through advertising, the new rule will still affect them," Zhang said. "So the drop of daily or monthly active users will have a direct impact on their advertising revenue."

In the long term, the new time limits for young gamers could affect the future growth of China's gaming industry. When the now-affected young gamers turn 18, their earlier lack of engagement could affect whether they see gaming as a hobby to engage with, and whether they will be able to play complex games that are popular among gamers by then.

But kids being kids, they will ultimately find loopholes to bypass the rules, analysts say. For example, younger parents, who themselves have been gaming for the past 20 years, may let children use their parents' accounts to play games. After all, gaming's not just for kids; China has a $43 billion video games market. It's home to 720 million gamers, almost half its total population. Nine in 10 people ages 25 to 35 play video games in China.

"We're not too concerned about gaming being shut off or just being inaccessible to people once they turn 18 or not being something that they want to engage with," Ahmad said. "The overall trend of China being the largest games market is not really changing."

More uncertain at this point is China's future esports landscape. The new time limit for underage gamers directly undermines the country's stated long-term goal of becoming an esports powerhouse. Many professional esports players and those in the pipeline are under 18. Three hours per week for training would be far from sufficient to prepare for international competitions. Chinese news media reported that esports clubs have been hit hard by Beijing's new rule, and have already stopped underage players from entering professional competitions.

China is the world's largest esports market, registering $15.5 billion in sales in 2020. At the same time that Beijing is trying to eradicate gaming addiction by regulating the content and monetization of video games, national and local governments are also putting forward policies to expand the esports market. Shanghai, for example, is supporting the construction of a $898 million esports arena. And Beijing's municipal government is doling out millions of dollars' worth of subsidies to esports tournaments and teams.

It's unclear now whether future rules will carve out additional time for young esports players to train. But the current state will present a challenge for esports organizations trying to develop talent, and it will be difficult for them to attract players in the future. "Ultimately, the pool will still be very large, so they'll still be able to find players that they can bring on," Ahmad said. "It will just be a smaller pool than before."

Correction, Sept. 3, 2021: In-game spending comprises a tiny fraction of revenue among players under 18 years old.

Fintech

Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep ReadingShow less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep ReadingShow less
FTA
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.
Enterprise

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep ReadingShow less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep ReadingShow less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.

Enterprise

Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep ReadingShow less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories
Bulletins