Tencent reported its first-ever quarterly year-over-year revenue loss as the internet giant was hammered by tighter gaming laws in China and a return of Covid-19 in the second-largest economy in the world.
Tencent fell short of revenue and profit projections. Tencent experienced macroeconomic challenges throughout the quarter as a result of Covid’s revival in China and the ensuing city-wide lockdowns that followed, including Shanghai’s financial hub. The “Zero Covid” policy adopted by the authorities hAnalyst estimates were not met by China’s second quarter economic growth of just 0.4%. The company’s finance, cloud, and advertising revenues were impacted by this.
Chinese authorities implemented a rule limiting the amount of time minors under the age of 18 could spend playing online games to a weekly maximum of three hours and only during particular hours last year.
The approval of new games was also put on hold by regulators from July 2021 to April of this year. Before a game is published and become monetizable in China, regulators must give the game the all-clear. In a report released last month, analysts at China Renaissance said that Tencent only released three mobile games in the second quarter. As a result, the business has relied on its already-popular titles to bring in money.
Tencent reported that domestic game revenue in the second quarter decreased by 1% from the prior year to 31.8 billion yuan, while game revenue internationally decreased by the same percentage to 10.7 billion yuan. The worldwide gaming market “had a post-pandemic digestion period,” according to the Chinese technology behemoth. People resorted to gaming for pleasure during the height of the Covid outbreak and the worldwide lockdowns, and businesses like Tencent and rival NetEase had a huge rise. Read more about this at cnbc.com