China's tougher regulations set to impact Korean game companies

China's tougher regulations set to impact Korean game companies

From left are NCSOFT founder Kim Taek-jin, Krafton founder Chang Byung-gye and Pearl Abyss founder Kim Dae-il

Pearl Abyss sheds 7.5 percent on Kosdaq

By Baek Byung-yeul

Korean game companies, including Krafton and Pearl Abyss, have hit a snag as China, which has the world’s largest game market, abruptly announced a new tougher measure on young people playing online games.

Regarding the restriction that limits online game playing to three hours a week, industry analyst said Tuesday the measure is a powerful move that would inevitably adversely affect the fundamentals of Korean game firms which have a high dependency on the Chinese market.

On Aug. 30, China’s National Press and Publication Administration (NPPA) told a local Chinese newspaper online game users who are aged under 18 will be banned from playing online games from Mondays to Thursdays. Instead, the government will allow young gamers to play online games only for an hour on Fridays, weekends and holidays from 8 p.m. to 9 p.m., citing fears that children could become addicted to game playing.

The government also urged stricter implementation of real-name registration and logins as online game providers must not provide any form of game service to users who fail to register and log in using their real identifications.

Market response was mixed. NCSoft advanced 1.69 percent at 666,000 won, Tuesday, while ordinary shares of Krafton were cut by 1.11 percent at 491,500 won. Pearl Abyss dropped by 7.55 percent to 93,300 won, data provided by the Korea Exchange (KRX), showed.

China's tougher regulations set to impact Korean game companies

A man plays an online game at a PC room in Beijing, Tuesday, a day after China announced a drastic cut to children’s online gaming time to just three hours a week. AFP-Yonhap

A state-run Xinhua news agency said the NPPA decided to apply the measure as children’s addiction to online games has drawn much attention in society. “The newly-released notice is meant for minors who are still in the developmental stage physically and mentally, and have poor self-control,” the news agency quoted an NPPA official as saying.

“A limited amount of gaming time for minors is understandable and acceptable as some online games can play an active role in their development, like sports, programming or chess,” the official added.

The measure was a foreseen move as a state-run media of China on Aug. 3 strongly criticized online games as “spiritual opium,” causing prices of Chinese game companies to plunge. Industry analysts said the regulation is expected to cause game companies that are offering their games in China to falter once again.

After the measure, investors showed negative response to local game companies such as Krafton, Pearl Abyss and Nexon that all have a high dependency on the Chinese market. Shares of Krafton closed at 491,500 won, down 1.11 percent from Monday while Pearl Abyss’s shares fell 7.55 percent. However, shares of NCSOFT, which is turning its eyes to other regions, increased by 1.69 percent from the previous day.

“It is the government’s strengthened measures against the game, which it defined as ‘mental opium.’ The Chinese game industry announced that people under the age of 16 account for 2.6 percent of entire sales, but the move raises concerns about the government’s negative attitude toward the game industry and slowing future growth due to preventing young gamers from gaming,” Chung Jong-kyu, an analyst at Samsung Securities, said.

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