Tencent Scores Twin Game Approvals After Months-Long Freeze

(Bloomberg) -- Tencent Holdings Ltd. and Netease Inc. got several of their less-important titles approved in China, as the world’s largest gaming market recovers from a months-long shutout that had thrown the industry into disarray.

Tencent’s Wood Joints and Folding Fan secured operational licenses on Jan. 13, its first games to win approval since regulators resumed doling them out in December. Its shares climbed as much as 2.7 percent on hopes the social media and entertainment giant may eventually get the green-light to make money off two of its biggest titles: PlayerUnknown’s Battlegrounds and Fortnite.

China’s gaming industry, which generates more than $30 billion of revenue, was hammered in 2018 after regulators froze approvals for new games, preventing companies from making money off their hits. That spurred Tencent’s first profit drop in at least a decade and helped wipe about $200 billion off its market value at one point. Regulators are now working through a backlog of thousands of games that accumulated as a result -- more than 350 have been cleared since December.

“Although the news flow on game approvals remains positive, we view the most important games in the pipeline are PUBG and Fortnite,” Mizuho analysts led by James Lee wrote. “These games are likely in the back of the queue due to political tension with Korea and the U.S.”

The suspension stemmed from Beijing’s campaign to combat gaming addiction and a reshuffle of regulators, casting uncertainty over Tencent’s main business. Tencent’s and Netease’s games were part of the latest batch of 95 approved on Jan 13., according to a notice posted by the State Administration of Press, Publication, Radio, Film and Television.

The violent nature of the battle-royale genre, where players vie to be the last person standing, may spook regulators who’re increasingly scrubbing the internet of gore. Regulators can be unpredictable: Tencent’s news app came under fire just this week for distributing content another agency deemed vulgar.

To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net

To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Edwin Chan

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