With no end in sight to China’s game approval freeze, Tencent continues to struggle against growing profit drops. To weather the storm, now it seems the Chinese gaming giant will undergo budget cuts to games that haven’t made it through the licensing process.
Bloomberg reports that Tencent informed marketing executives of the budget decrease a few days ago via a letter asking them to keep a close eye on cash flow and keep spending in check so they can “endure the hard times together.” In practice, this means for example that unlicensed games will need to return any unspent marketing money to Tencent as a whole to be used elsewhere.
Those unlicensed games represent the vast majority of Tencent’s budget troubles. Due a freeze on game licenses being issued in China by the government apparently due to concerns about child myopia, hardly any games have been approved for release in the country since April. Until recently, there was hope of some approvals for companies like Tencent through a special “green channel,” but that too has been closed.
As a result of the freeze, the Chinese game market has slowed considerably, a change that’s beginning to have an effect on the international industry as well. Tencent in particular has been struggling, seeing a loss of $190 billion in market value as of early October and undergoing a major restructure to focus on other technological trends and revenue sources.
It is unknown when the freeze will be lifted, though some analysts have said it could last as late as March 2019.