Source: Gelonghui

After the “Draft Measures for the Management of Online Games (Draft for Comments)” released in the intraday period last Friday triggered a rare sharp decline in the capital market, the Board quickly absorbed public opinion and made a positive response.

The Department of Public Administration stated, “Public consultation on departmental regulations is a process of listening to opinions from a wider range of people and improving the rules and regulations. Further revisions and improvements will be made on the basis of continuing to listen to the opinions of relevant departments, enterprises, users, etc.”

This was probably a reassuring pill for the originally panicked market sentiment and released a sense of correction of some excessive negative interpretations of voices in the market.

In fact, almost all of the provisions in this “Opinion Draft” are a continuation of the rules governing the game industry over the past few years. There are no major new rules added; however, some of the provisions that seem “harsh” have caused a lot of discussion. It can also be seen from the Board's “corrective” response that this was originally just an announcement of a normal work process, not a major issue for the market.

One important reason for this huge reaction is that confidence in the current capital market is still weak, and at the same time, the vast majority of people in the market are unfamiliar with the background of game regulation. In such a special market environment, the publication of such important documents in the market by the Department of Public Administration inevitably makes people feel that they are returning to the “darkest hour of the education and training industry,” which in turn triggers a stampede in the market.

Now that we have come to this point, let's take an objective look at how much impact this “Opinion Draft” has on the industry and on the company.

01 How to interpret it correctly?

First, this “Opinion Draft” is currently only a solicitation of opinions. It is not a final legal provision. It also mentions that it will be further revised and improved after listening to the opinions of all parties.

Judging from this statement, there may be quite a few positive changes in the final written document.

Also, what is certain is that it is likely that this edition will be much more “friendly” to the game industry than the current edition.

Second, this “Opinion Draft” did not come out of nowhere; it has some historical legacy.

In the beginning, the game industry was managed by the Ministry of Culture, and the “Interim Measures on the Administration of Online Games” were officially issued and implemented by the Ministry of Culture on August 1, 2010.

In 2018, the department responsible for online games was changed from the cultural administration department of the State Council to the State Administration of Press and Publication. Subsequently, the measure was officially abolished on July 23, 2019. The regulation of the game industry has been given to the Board of Administration, including the enactment of new regulations to take over.

In fact, in recent years, the Board has also been drafting new management measures for online games, but the industry still doesn't know the exact timing of publication.

However, due to the impact of various complex factors in recent years, the new regulations were not announced in a timely manner after the original regulations were abolished, causing a lot of inconvenience to newly established game companies and companies newly launched game business later. More than 4 years have passed now. Along with the country's overall and steady economic recovery, there are requirements to step up the new regulations.

In fact, according to the previous work plan, this draft was to be published within this year, and now it is the last few days of the end of 2023.

Therefore, objectively speaking, the publication office is the work before implementation in order to introduce the new “Interim Measures on the Administration of Online Games” as soon as possible and fill in the gaps in previous regulations and guidelines, which is why this publication was made.

It's just that the press department didn't expect such a big reaction from the market.

According to changes in tone over the past two days, I believe that the opinions and suggestions of more companies in the industry will soon be compiled, and then many regulations will be revised.

Another aspect is that on Friday afternoon, the department changed the evening habits of previous years, announced the approval list for a new batch of imported game versions, and added 40 new game versions in one go, accounting for nearly 40% of the number of imported versions this year.

Obviously, this is also a reassuring hint of Friday's incident by the Department of Publishing to explain to the market its positive attitude towards regulating the game industry.

So, how should we correctly understand some of the provisions in the “Opinion Draft” that have been intensely discussed in the market?

Objectively speaking, the core restraint goal of this policy is actually to target minors and to restrict some extreme issues, but since it is true that there are some one-size-fits-all situations, the outside world is like a frightened bird, and there is room for optimization in some of these rules.

After all, the game industry is essentially not a public welfare industry; it is a commercial act. On the premise that game companies comply with regulatory standards, their rational way of operating in pursuit of reasonable profits should be recognized.

For example, restrictions such as “Online games must not set inductive rewards such as daily logins, initial recharges, and continuous recharges” will not have much impact on gamers' consumption, but they will have an impact on game manufacturers' product operation assessments. After all, all marketing behavior is inductive to a certain extent. In this regard, games are no different from other industries. Normal promotional activities and concessions to consumers are beneficial to consumers. This is also the key for manufacturers to verify the success of new products, and they should be allowed or even encouraged.

For example, “all online games must set user recharge limits”, the original purpose of the policy was to guide consumers to spend more rationally by limiting the single recharge limit, rather than limiting the total amount spent. In this regard, it is reasonable to limit it only to minors, but if adults are also included in the restrictions, it is inappropriate, because adults are mentally mature enough and have an income base, so their freedom of consumption is unnecessary and should not be restricted anymore.

As for the “restrictions on high-value consumption,” which is often disputed in the market, this has actually always been the focus of the State Press and Publication Administration in the direction of protecting minors. At the same time, it is reported that the original intention of this policy actually has another purpose, which is to crack down on illegal acts such as online gambling and money laundering. It's just that there is no specific explanation here, so it seems to be a bit overly restrictive, which can easily cause people to misunderstand.

Furthermore, the document also places strong restrictions on new business formats such as mini-games and cloud games. These new business formats not only accommodate a large number of entrepreneurs and employment groups, but also have a driving effect on game industry innovation and technological innovation that cannot be ignored. We should adopt more flexible and relaxed regulatory measures to guide and encourage the development of these new business formats, without imposing early and severe restrictions.

Overall, therefore, this “Opinion Draft” can be said to be a further continuation and strengthening of existing regulatory guidance, but it is also true that there are some rules and regulations that are not clear enough, and at the same time, they are too one-size-fits-all in terms of restrictions. We still need to listen to opinions and suggestions from more parties and make adjustments and optimizations according to the actual situation.

02 What is the impact on game companies?

Yesterday, I specifically asked a circle of game self-media friends. Most of them had similar feelings to me.

It is undeniable that this “Opinion Draft” benefits companies that focus on game quality and innovative teams. It can guide more game companies to focus most of their energy and resources on game quality control and explore more healthy innovative gameplay, and help the industry drive out bad money.

Looking at the short term, the “Opinion Draft” will still give clear guidance on some unhealthy behaviors or grey areas in the industry. It can also be said that it does not encourage some game companies to continue to develop in these directions. This is also understandable.

Everything has two sides, including industry policy. After all, it will be like a balance, encouraging some aspects and suppressing and controlling others. This is a balance of policy considerations. Maybe there may be some “slant” at times, but just like the balance, no matter how inclined it is to one side, there will always be another side.

So, more specifically, what kind of games and game companies will this edition of the “Opinion Draft” have an impact on? What is the impact?

First, it is certain that game makers will be affected. The market votes with their feet. Although there are elements of stampede caused by panic, this sharp decline already reflects the truth.

If the final draft is still this demanding, many companies' products and even business models will be impacted.

In particular, games with high ARPU values, such as legendary MMO and SLG games, and some two-dimensional card drawing games.

What is less affected are games with high DAU and low ARPU values, such as leisure, e-sports, and social networking. For example, the main revenue source for Tencent games and most major DAU games is a weekly card or monthly card. Whether they are judged as continuous login rewards is currently determined that they are all not eligible. There is a high probability that game companies like Tencent will be affected by them, so there is a small probability that game companies like Tencent will be influenced by them.

Also, there are mini-program online games (IAA for short), which will introduce new independent regulations in the future.

In the past, as long as IAA did not involve internal purchases, it did not require a version number; it only required a website filing. However, now it is equivalent to regulations. It is believed that in the future, a number of IAA games that rely on advertising revenue to be monetized will also be regulated. When it comes to IAA game regulation, most industry insiders believe that this may be a “boot landing,” and that early standardization has more advantages than disadvantages.

In this regard, it may have a major impact and impact on some small and medium-sized game companies that mainly develop and operate IAA. Conversely, for platform companies such as WeChat Mini Games and Douyin Mini Games, the impact will not be particularly obvious.

However, it will have a big impact on small and medium-sized companies, as well as companies that rely on a single product as the main source of revenue, and it is expected that it will force them to redesign the commercialization of products, especially the restructuring of game models and revenue.

Looking back over the past few years, under various regulatory guidance, the game industry has finally been able to comply with policies and regulations. In particular, leading enterprises in the industry did not hesitate to continue to shrink in the game industry for the sake of compliance, and even overreacted. They were afraid to invest in development or even cut out a large number of related projects, causing everyone to lose confidence in the future of the game industry. Nor should this be what policy regulation wants.

Therefore, with regard to the regulatory issues of the game industry, whether it is the current “Opinion Draft” or future new regulations, the policy side should take more account of the actual state of the industry and actively “add strength” to the healthy development of the industry.

03 The country will not ignore the strategic value of the game industry

Over the past two years, while domestic regulation and rectification of the game industry has been carried out, the game industry has received unprecedented development and capital attention abroad.

Giants such as Microsoft, Apple, Google, META, SONY, and Nintendo are building a voice in the game industry chain in their own way in different fields.

For example, Facebook, a world-famous video traffic platform, did not hesitate to spend tens of billions of dollars to transform and develop the “metaverse,” and even changed its own brand to META.

At the beginning of last year, Microsoft announced a bid of up to 68.7 billion US dollars (equivalent to up to 500 billion yuan) to acquire Activision Blizzard Games, which attracted global attention. Despite this, countries such as Britain and the European Union have successively blocked takeover cases and complained that Microsoft monopolized the game market.

In October of last year, the European Union passed the “Game Act,” which focuses on the development of the video game industry, by a full vote, calling on Europe to support the development of the video game industry through national and EU aid, and formulate long-term plans for the development of the video game industry in order to retain talents in the video game industry.

Not only the European Union, but in recent years, the US, Russia, Brazil, Saudi Arabia, Australia, Japan, and South Korea have all announced that they have raised the game industry to a strategic level.

Why should companies and countries invest so much effort in developing the game industry?

Because they have all realized that the development of the game industry is a huge driving force for the economy, technology, and cultural industries.

The game industry is not only a product of deep integration with technology, but it also highly coincides with the direction of future hard technology, such as 3D graphics processing, semiconductors, high-performance chips, software algorithms, computing power, communication equipment, display equipment, and AI interaction. Many of these fields have formed the strongest demand drive from the beginning, the game industry.

At the same time, the upstream and downstream of the game industry chain are linked to the development of industries such as animation, live streaming, social networking, and entertainment. It not only provides a large number of jobs in these fields, but also plays a huge role in cultivating and transporting talents with lower-level technology and advanced hard technology technology.

Michael Levitt, winner of the 2013 Nobel Prize in Chemistry and a professor at Stanford University in the US, once publicly stated, “One of the most important reasons why we have such powerful computers today is that young people play video games. Without video games, we would not have machine learning or artificial intelligence.”

In November of last year, after the European Union, People's Online also published a review article on “People's Financial Assessment: Digging Deeper into the Value of the Video Game Industry”, arguing that gaming has become an industry of great significance to a country's industrial layout and scientific and technological innovation, deserves attention and in-depth exploration of its potential value, and should strengthen strategic planning and focus on long-term layout.

In fact, since the outbreak of the Internet wave, gaming in China has developed rapidly into a huge, wide-ranging industry. However, with the so-called “no rules and regulations,” no industry can break away from standardized and orderly policy guidance. Among them, there must be some bad or irregular phenomena in the development of the game industry over the years, which need to be regulated and rectified.

However, the state's regulatory attitude on the game industry is not about “fighting,” but rather focusing on “leading.” In fact, over the past few years, the country has also successively introduced many support policies to guide the game industry to “grow bigger, improve, and become stronger” in the direction of “excellent health.” Among them, there is no shortage of strategic top-level designs, such as in the metaverse, animation, and e-sports.

Among these, there is really a lot of potential.

So, going back to the publication of the “Opinion Draft” this time, from a certain point of view, it is actually just a “summary” of the game industry's regulatory work over the past two years. For game companies, it is also a “boot landing.” However, it is true that there are still some places that are contrary to business laws and are not conducive to the innovation and development of the game industry. It is also necessary to heed market opinions and suggestions from enterprises, users, etc., and make adjustments as reasonable as possible.

04 End

Finally, there is one more point I would like to express. The long-term health and prosperity of the game industry requires good game content, a matching ecology and soil, appropriate methods and means to cultivate “good” players, players with the correct “three views”, and players who can grow and think.

Let's not underestimate players' “ability to clean themselves”. Not all players are “ripping puppets” of “evil” game companies; it's not that people along the way can't get along in the end. Players and game companies that produce and operate game content will always go both ways. Naturally, good game companies will try their best to maintain good players that are beneficial to the ecology and industry. On this point, there is no need to worry too much.

At the same time, when the “big head style” of management and restraint has had little effect, we should also think about whether it is out of date? Most of the time, the author believes that players, game companies, and industry regulators may have a better choice that can create win-win conditions.

As the saying goes, with more mutual understanding, it is possible to think twice before moving forward. It will only be better in the future.

edit/ruby