Chinese internet and entertainment conglomerate Tencent’s stock market value plummeted by $20 billion after the Chinese government implemented new videogame and internet regulations. The rule changes were part of an effort to improve the health of the nation’s citizens.
A recent study by China’s Ministry of Education highlighted an increase in myopia cases. It lists mobile gaming, heavy study loads, and a lack of physical exercise as the main reasons for nearsightedness in young people. In April, the Chinese government stopped approving new mobile game releases.
“From a revenue growth perspective, gaming is a key area of weakness, our biggest game is not monetizable,” said Tencent President Martin Lau on a conference call according to Bloomberg. “This is something that’s a little out of our control, but over time we’ll solve it.”
The reported $20 billion slump represents Tencent’s first quarterly loss in 13 years and the company has now lost $160 billion in market value this year. Tencent is currently valued at $413 billion.
“The major disappointment was the top line, and that’s on top of estimates being hugely guided down from about a month ago,” said Billy Leung, an analyst with Haitong International Securities Co. in Hong Kong according to Bloomberg. “They’re concerned about their core business and looking for new areas of growth,” he said. “The deeper implication is that games will be slowing down.”
SportTechie Takeaway
Tencent partially owns esports developers Activision Blizzard and Epic Games, and has not been able to profit on some of the world’s most popular games in China thanks to the imposed government restrictions. As the leading esports firm in the world, Tencent’s financial loss may have a trickle down effect on the rest of the industry.
While government regulations in the U.S. would be unlikely, there has been an increased focus on the health of esports players stateside. In July, sports recovery brand Hyperice partnered with esports consulting firm Foundry IV to create an initiative that prioritizes the health of esport players by offering solutions related to muscle relaxation and stress reduction.