NetEase and Tencent Finally Get Green Light to Publish New Games in China

On the evening of September 13, China’s National Press and Publication Administration announced a new batch of approval numbers authorizing the release of new online games in the country. The latest list, which includes a total of 73 games, finally includes titles developed by leading game firms NetEase and Tencent.

An “approval number” is a license for publishing games in China, representing a legal document to protect the developer’s copyright, as well as an approval document for the game to be published online for the domestic market. The list of newly approved games this time includes NetEase‘s “Allstar Streetball Party.” This is the first time NetEase has obtained such a number after approvals resumed in April this year. Affected by this news, NetEase‘s Nasdaq stock rose before the market opened on September 14, Eastern Time.

The “Health Defense” of Nanjing Wangdian Technology Co., Ltd. has also approved. The company is wholly-owned by a subsidiary of Tencent. The chairman of the game publisher company is Hou Xiaonan, President of Tencent‘s China Literature, a company principally engaged in the operation of an online literature platform, and Vice President of the Platform and Content Group of Tencent. The game was first released in May 2021 at the Tencent Game Annual Conference.

In addition, Shenzhen Zhongqingbaowang Network Technology’s “Xeno Command,” CMGE Technology’s “Rakshasa Street MOBILE,” and XD Inc.’s PC game “Jianghu Simulator” also were approved. According to CMGE Technology, the firm has obtained five approval numbers, and these games will be launched in the second half of the year.

Many Chinese game companies have recently announced their 2022 interim reports. Tencent‘s game business revenue in the second quarter of this year was 42.5 billion yuan ($6.1 billion), down 1% year-on-year and 3% month-on-month. NetEase‘s growth rate in the first half of the year remained steady, and the revenue growth rate of its game business in the first and second quarters both exceeded 15%. 37Games and Perfect World each achieved growth in net profit attributable to their parent companies in the first half of the year, while G‑bits Network Technology and Zhejiang Century Huatong Group’s performances have declined to varying degrees.

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According to the performance of game companies in the first half of the year, several game companies with a year-on-year increase in net profit attributable to their owners said that they mainly rely on “old” games to contribute to their performance, and the influence of the approval numbers has not been fully highlighted.

It is worth mentioning that exploring overseas markets has become a new strategic choice for many Chinese game companies in recent years. In the first quarter of this year, NetEase CEO William Ding put forward the goal of attaining an overseas market share of 40%-50% for its game business. According to the “China Game Industry Report from January to June 2022,” in the first half of 2022, the overseas revenue of domestic games has achieved positive growth. From January to June, the actual sales revenue of China’s self-developed games in the overseas market was $8.989 billion, a year-on-year increase of 6.16%. In absolute terms, Tencent ranked first with 21.3 billion yuan in overseas revenues.