Tencent and Netease Stocks Recovering Slightly, But Still Have a Long Way to Go

Recently, Tencent and Netease have made some stock price gains after losses that they incurred after announcements by the Chinese government to limit the distribution of video game licenses in an effort to curb the time China’s youth spends playing video games. China is the worlds largest gaming market, boasting 619.5 million players in China that are projected to spend $37.9 billion in 2018 alone. 

Tencent’s stock took a mighty big dip to reach their lowest levels, at $39.28 a share, seen this past year after the announcement came in late August 2018. However, the technological giant’s stock price had been dipping slightly even before that, no doubt in response to the swirling rumors of the Chinese government decision.

Tencent Stock
Tencent Stock Price – 1 Year

Netease, a Chinese Internet technology company that also publishes games, saw its stock price take a massive tumble as well. It reached a year-low $188.39 just days after the announcement. However, their stock recovery will certainly be helped by their recent shift towards e-commerce, which was detailed earlier this year.

Netease Stock Price – 1 year

The Chinese Government’s decision might be good news for both companies and consumers. The limiting of game licenses in China has the potential to make the video game market swing in one of two directions: Better games with more in-game purchase opportunities or the same games with more in-game purchase opportunities. We might even see a switch to a predominantly free-to-play model (with in-game purchases) so that updates to the game can increase revenue without having to request another license for another game!

We really hope that Chinese developers and publishers feel the need to develop and publish even better games that can maintain a player base for a long time in a limited gaming market. And that Chinese consumers push these developers and publishers to create the high quality gaming products that they are very much capable of.

Gaming Market Differences: China and the West
Gaming Market Differences: China and the West

As the video game industry booms in China, many Chinese developers are seeking to replicate their games’ success in Western markets. However, there are some fundamental cultural differences that make this transition precarious, especially if the developers assume that the Western and Chinese markets are identical. Read more