The online gaming industry tagged as “Spiritual Opium” caused Tencent share to fall
The online gaming industry became much more popular over the years. The newer generation is fond of mobile gaming. Mobile gaming evolved from more minor time passing games to competitive giants holding esports tournaments and such events. As regulators are cracking down on tech giants like Google and Facebook constantly, they are eying for the gaming industry. Especially the mobile gaming sector. Tencent, one of the biggest names in tech, suffered due to articles shared by state media.
Online mobile gaming can be addicting and more affordable for young people; they spend too much time on the platform. So, state media article called the circumstances “spiritual opium.” Which caused company shares to fall, and eventually, $60 billion was wiped from market value. Economic Information Daily is a Chines state-run newspaper that specialises in economics. They specifically mentioned “Honour of Kings” from Tencent games as very addictive. The article said minors were investing too much time in the game and were adequately addicted. It was affiliated with Xinhua. Xinhua is a parent organisation/ news agency run by the State Council of the People’s Republic of China. The state already intervened with education, technology, and property management, so the pressure was eventually about to grow on the online entertainment sector.
Beijing based consultancy partner Yin at Trivium said, “They don’t believe anything is off limit and will react, sometimes overreact, to anything on state media that fits the tech crackdown narrative.” Stocks were not down at this level in a decade. The article first appeared on the WeChat outlet website and later was removed. But it reappeared later with the “spiritual opium” section, which caused Tencent shares to fall 6.1%. For a company as vast as Tencent, losses were off billion, as we mentioned before. Even Ecteronic Arts (EA) shares were down 2.8%, and Take-Two Interactive Software decreased 7.6%. They have the most considerable exposure in the Chinese market among other U.S. peers. Activation was down 3.8%, too, as a result. So many companies took a hit after the publication. Tencent reported they were onto the matter, and eventually, measures are going to take place to limit youth exposure to the addicting online gaming sector. Where they remain and spend most of the time. As the pandemic hit, many people leased under online gaming for pleasure, but the youth became most exposed.
Prosus has shares listed on Amsterdam that has a 29% stake at Tencent. They encountered the downfall too. European gaming company Ubisoft and Embracer group also fell entirely down in the margin of share losses. They met 5% and 3.7% share falls, respectively. So, the talk is not shaking businesses in China but also global leaders of the industry.
Since the headline used opium; and it is a highly addictive drug. The First Opium War took place when Britain and China encountered it in 1842. Thus, the matter is pretty sensitive, which gained much more attention than it was supposed to. Tencent is onto measurements for the time youth spends on gaming and money they spend. Honor of Kings will get the first implementation results and eventually ban children under 12 from playing it. Game developer XD Inc, rival NetEase Inc, and mobile gaming company GMGE Technology Group Ltd took a hit of 8.1%, 15% and 12.59%, respectively.
State Administration For Market Regulation (SAMR) also looked into the matter and investigated chip distributions. Along with that, price hoarders, scalpers are going to be punished if they are spotted. As the case is severe and tech-hoarding is not a great idea because it limits people from achieving good workflow in the highly competitive technological world, the matter is seriously considered.
Chinese authorities are global tech leaders. They are pretty careful about the venture, which helps them make tough decisions that may help future generations succeed rather than spending more time on gaming. Online gaming and education are getting further restrictions and even banned for profit-tutoring on core subjects at school. It attacked the $120 billion private tutoring sector and eventually generalised the education sector by making the same rules for every citizen. According to Reuters, Taiwan Semiconductor Manufacturing Co Ltd briefly compensated Tencent, and it is Asia’s most valuable market by capitalism. More cautions and precautions are going to take place in the sector.