China's Tencent 2Q profit falls 2%, first decline in almost 13 years

RiotGames

RiotGames

China has halted the approval of new game licenses due to a "restructuring of power" in government agencies, Bloomberg reported on Wednesday.

Riot Games relationship with its parent company Tencent has reportedly been strained over declining profits and mobile games, according to a report by The Information.

The Chinese tech conglomerate said that its net income for the three months that ended in June was 17.9 billion yuan ($2.6 billion), a decline of 2% compared to the same period past year.

Mobile gaming revenue rose 19% year-on-year in the quarter to 17.6 billion yuan, representing a 19% sequential decline.

After soaring into the ranks of the world's biggest companies, Tencent has lost more than $US150 billion ($207 billion) of market value as the company struggles to monetise new games.

Shares are trading down nearly 7% on Wednesday.

China's games industry regulator said it had received several complaints about "Monster Hunter: World", which is rated for players ages 13 and up in the U.S. Other sources say the move reflects infighting within China's media and entertainment regulatory system, which has led to a backlog of games and feature films that await approval and that are unable to commit to marketing campaigns for lack of a launch date.

Industry executives have said many games in China, and not just those belonging to Tencent, have since March faced a hiatus in license approvals after China revamped its content regulatory body and divided its powerful State Administration of Press, Publication, Radio, Film and Television earlier this year.

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The very government that has favored Tencent as a technology champion is now directly hurting its results, with the bureaucratic shakeup in Beijing blocking its path to making money from games.

Shares of Tencent fell 3.6 per cent to HK$336 in Hong Kong before earnings were announced.

China may resume approvals around September, Wu said.

Tencent reports revenues of 73.6 billion yuan (~$10.6 billion), a year-on-year increase of 30 percent.

Tencent blamed its profit decline also on fewer investment gains.

Lau said Monster Hunter was blocked because its content "was not exactly compliant", adding Tencent was working with the developer to adjust the content for future approval. Users of its popular WeChat app grew incrementally to 1.06 billion.

Gaming for now remains its bread and butter. The majority of this is attributed to Fortnite: Battle Royale and PlayerUnknown's Battlegrounds, as Tencent has been unable to market the desktop versions of either game, and PUBG's mobile variant, without approval.

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