July 4, 2017 / 11:48 AM / 3 months ago

China communist party mouthpiece slams Tencent game; shares slide

A child plays the game "Honour of Kings" by Tencent at home in Dezhou, Shandong province, China July 2, 2017. Picture taken July 2, 2017. REUTERS/Stringer

HONG KONG (Reuters) - Chinese communist party mouthpiece People’s Daily stepped up its criticism of a mobile game developed by Tencent Holdings, a day after the country’s top gaming and social media firm said it is limiting play time for users of the “Honour of Kings” game.

Shares of Tencent, one of Asia’s most valuable firms with a market value of HK$2.6 trillion ($333 billion), ended 4.1 percent down on Tuesday, its biggest one-day fall in 17 months, after it announced restrictions for some users of the world’s top-grossing mobile game, responding to complaints that children were getting addicted.

Regulatory control on such “social games” is imminently needed, the People’s Daily said on its website on Tuesday, after calling the game “poison” on Monday, alluding to a similarly pronounced nickname in Chinese that players jokingly use to describe the addictive nature of the game.

Tencent did not immediately respond to a request for comment.

Honour of Kings, a multiplayer role-playing battle game, is the most popular mobile game in China with around 55 million daily active users - more than Pokemon Go at its peak. It is the world’s top-grossing mobile game according to analysts, with estimates of its monthly revenue ranging from 1 billion to 2 billion yuan.

The state media attack comes amid a crackdown on content and entertainment from China’s internet censors.

“The state media commentary calling for tighter industry regulation is a cooling signal for gaming stocks that could cause short-term declines, but whether there would be revenue impact depends on what regulatory measures would follow,” said Connie Gu, analyst at BOCOM International Securities.

Gu estimates the game, with 200 million users, contributes around 7 percent to Tencent’s total revenue.

While Tencent’s official website for the game says it is “for 16 and above”, it does not ban younger users and the game is popular among teenagers. Tencent said it introduced the play time and spending curbs for minors and those under 12 effective from Tuesday out of social responsibility.

China Merchants Securities International analyst Richard Ko estimates the game accounts for around a third of Tencent’s mobile gaming revenue - which grew to 12.9 billion yuan in the first quarter. Ko estimates that assuming 25 percent of its players are under 18, Tencent’s play curb could cost around 5 percent of the game’s 2017 revenue, or 0.5 percent of Tencent’s total revenue which he estimates to be 224 billion yuan.

Reporting by Sijia Jiang; Editing by Muralikumar Anantharaman

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