Tencent shares tumbled on Tuesday after the internet group pulled popular video game Monster Hunter: World from its distribution platform, WeGame. The ruling by regulators is a blow to Tencent, which had been banking on the success of the action RPG to boost flagging PC sales in China.
The latest edition of Monster Hunter became available on WeGame last Monday and had garnered huge attention, with more than one million pre-orders before its release. However, regulators cancelled the license that Tencent acquired from Japanese developer Capcom Co Ltd earlier this week after it said that the game’s contents had not met regulatory requirements.
Tencent Holdings Ltd saw significant declines on the stock market on Tuesday, as it shares fell by more than 3% and wiped out its market value to the tune of $15bn. The decline came about due to concerns about Tencent’s gaming revenue, as the ruling by authorities to prevent the sale of a blockbuster franchise is not the first issue that it has had with regulators.
Last year, Tencent saw a $15 billion drop-off in market capitalization in just one day after criticism from state media prompted it to curb children’s playing time for its big money spinner, Honor of Kings. Market value did recover and hit a record high in January, but steady declines since then have seen $160bn lost in value and a 14% fall in stocks.
“People are very concerned about Tencent in the short term,” Northern Trust Capital Markets’ Head of Research for Asia Douglas Morton said. He added: “For us, this [firm] is a medium-to-longer-term holding with a history of good investment. I think the monetization [of the blocked games] will happen; it is just a matter of time.”
Monetization is another thorny issue in China, as Tencent has been unable to sell an updated version of battle royale game Players Unknown Battleground (PUBG). Regulators deemed the game too violent, and while Tencent altered the contents to satisfy authorities, it has not yet received a license to release it on the WeGame platform.
China reformed its content regulatory body earlier this year, but industry executives have revealed that companies have been holding out on new licenses for games sales for almost six months. “The key here is, not only PUBG but no games are able to get licenses now,” an anonymous source within Tencent told Reuters on Tuesday.
The source added that Tencent’s staff expressed confusion by the latest ruling, as the company procured a sales license for Monster Hunter: World earlier this year, and the game was not as gory as other titles on the marketplace. The insider said: “It’s not impossible that you could still be hit even after you pass the censors, in the same way a movie can be pulled after public screening.”
Tencent has not made an official comment on the issue, but the latest move by regulators is sure to be another blow to its attempts to revitalize PC gaming efforts. Analysts had expected Monster Hunter: World to be a tentpole release for Tencent in 2018 and a key part of its strategy to beat out competition from rival platforms such as US-based gaming marketplace Steam, which now has around 20 million users in China.
According to IHS Markit Industry Analyst Chenyu Cui, the fantasy-themed game had “offered Tencent a chance to compete directly with Steam, that’s why they wanted to launch as soon as possible”. Monster Hunter: World was available at a minimum price of $43 on WeGame before its removal, and Tencent confirmed on Monday that anyone who had bought the game would be eligible for a refund “without conditions”.