Tencent Holdings Ltd (0700)

https://www.bloomberg.com/news/articles/...rs-persist

Quote:Tencent Shares Dive After Chinese Media Brand Online Games ‘Spiritual Opium’

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As mentioned before (https://www.valuebuddies.com/thread-5110...#pid162911), businesses that are net-negative for stakeholders, are not durable business models, and are businesses I avoid.

China Slashes Kids’ Gaming Time to Just Three Hours a Week
https://finance.yahoo.com/news/china-sla...35216.html

Quote:The new regulation, unveiled by the National Press and Publication Administration, will ban minors, defined as those under 18 years of age, from playing online videogames entirely between Monday and Thursday. On the other three days of the week, and on public holidays, they will be only permitted to play between 8 p.m. and 9 p.m.

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Impact should not be material (not much profit from that age group); but will regulations stop there?

(not vested)

Edit: About 2.6% of Tencent's gaming revenue comes from minors under 16 (https://en.tmtpost.com/news/5584576).

Edit2 (red): This is one of the most ridiculous ruling so far, in terms of practicality and sensibility. How much of a server overload that would cause? How much of a backlash from Chinese Gen Z?

(31-08-2021, 12:12 AM)Wildreamz Wrote: China Slashes Kids’ Gaming Time to Just Three Hours a Week
https://finance.yahoo.com/news/china-sla...35216.html

Quote:The new regulation, unveiled by the National Press and Publication Administration, will ban minors, defined as those under 18 years of age, from playing online videogames entirely between Monday and Thursday. On the other three days of the week, and on public holidays, they will be only permitted to play between 8 p.m. and 9 p.m.

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Impact should not be material (not much profit from that age group); but will regulations stop there?

(not vested)

Edit: About 2.6% of Tencent's gaming revenue comes from minors under 16 (https://en.tmtpost.com/news/5584576).

Edit2 (red): This is one of the most ridiculous ruling so far, in terms of practicality and sensibility. How much of a server overload that would cause? How much of a backlash from Chinese Gen Z?

I feel the root of the problem is the current business model of games, being free-to-play and pay-to-win.

I think the more effective way to curb gaming excesses (both money spent and time spent) is simply to ban pay-to-win games and revert back to the old model of pay-to-download-play games. Old model being less lucrative, with less $ to make, the gaming industry will shrink and there would be less developers churning out addictive features.

This solves the issue at the root and I think is more practical than limiting play-hours. But perhaps would have too much business/legal ramifications.

I wonder how are they going to police this rule. Adults will start creating and selling accounts to children unless they use facial recognition for every gaming session

(31-08-2021, 07:26 AM)Choon Wrote: I feel the root of the problem is the current business model of games, being free-to-play and pay-to-win.

I think the more effective way to curb gaming excesses (both money spent and time spent) is simply to ban pay-to-win games and revert back to the old model of pay-to-download-play games. Old model being less lucrative, with less $ to make, the gaming industry will shrink and there would be less developers churning out addictive features.

This solves the issue at the root and I think is more practical than limiting play-hours. But perhaps would have too much business/legal ramifications.

Yes, thank you. Games that are free-to-play and pay-to-win are designed not to optimize entertainment value per dollar (so people will buy your next hit), but optimized to get you to spend more time on the game so you will likely to pay for more stuff; frustrate you so you will pay to avoid grinding/waiting etc.

And people who can't afford to pay and lack self-control (mostly minors), are the ones to get the brunt of negative externalities.

Tencent holdings is one of the largest game maker in the world. If they are to move back to the old model where everything is paid upfront, tencent's market value will fall off the cliff.

To be frank, a lot of products in other industries are moving towards a low upfront cost but with continuous recurring revenue throughout the life cycle (think of the diamond mapping product- Sarine, software services such as Silverlake Axis and insurance- Great Eastern/Ping An). Their strategy is enticing people with low cost upfront

While revenues from the under-18s are small, the implications are big because they make up a large part of future paying customers.

With restrictions on only 3 hours of gaming per week, this effectively kills most of the gaming market for under-18s (1 hour of gaming per day for 3 days is intolerable for gamers). And if you have fewer young people exposed to the pleasures of games, you are very likely to also have fewer adult (and paying) gamers in the future. They would have moved on to other activities to engage themselves. So the Chinese gaming market has taken a significant blow. And without the large customer/audience base of under-18s, related industries such as e-sports in China will also be badly hit.

There will no doubt be some tech savvy kids who will know how to bypass those restrictions. But if the problem of youth gaming continues to be serious (restrictions can be easily bypassed, and most kids are still gaming long hours), the government need only go after developers like Tencent. So I believe Tencent will be very motivated to ensure that they meet CPC's goals.

Soon, Chinese kids are going to have a lot of free time with no more tuition and almost no more gaming. Parents are going to have a hard time to fill this vacuum and engage their kids. There's probably a market opportunity here.

I believe gamers can pivot to offline/pirated games that developers like Tencent has no way to control. It's a cat and mouse game from now on.

Such hard-handed tactics doesn't solve the root-cause of the problem, only addresses the symptoms, and likely results in unintended backlash.

Pirating games is not that easy. This is because when you pirate a game you are taking a snapshot of the game's current edition. Online games have frequent patches. Unless the pirate developer is very free to keep copying the game and then sending to those who had bought from him a new edition and if it is a game with saved data he has to ensure his pool of players skills/items are kept intact when he rolls out the new edition of his pirated game.

The only exception to those games are pokemon or sports games which do not update their content much once they sell it in shops. These games are still using the old model of selling their game at an upfront high cost. But even games like Pokemon are moving on to online interactives with other players

(31-08-2021, 02:04 PM)CY09 Wrote: Pirating games is not that easy. This is because when you pirate a game you are taking a snapshot of the game's current edition. Online games have frequent patches. Unless the pirate developer is very free to keep copying the game and then sending to those who had bought from him a new edition and if it is a game with saved data he has to ensure his pool of players skills/items are kept intact when he rolls out the new edition of his pirated game.

The only exception to those games are pokemon or sports games which do not update their content much once they sell it in shops. These games are still using the old model of selling their game at an upfront high cost. But even games like Pokemon are moving on to online interactives with other players

The first part confused me a little. Since pirating is perhaps easier than ever (torrenting, APKs etc.). My initial thought is people will pivot to offline games. Or pirated versions of offline games, since platforms like Steam (or their Chinese equivalent) might be able to impose time limits to restrict play time of even offline games.

With regards to online games. There are ways to pirate online games (private servers etc.; even 12 years old are hosting private servers for Minecraft nowadays). But taking away the ability to interact with thousands of people in real time, probably makes free-to-play/pay-to-win game very unappealing to even attempt to circumvent restrictions.

There are perhaps 100s of other ways to circumvent restrictions, as discussed here: https://www.reddit.com/r/leagueoflegends...ne_gaming/

Interesting to consider the unintended impact of a generation of Chinese youth, growing up getting used to circumventing official legal edict.