China is an incredibly lucrative market for publishers and developers as long as their games adhere to the country's strict rules and regulations.
The National Press and Publishing Authority (NPPA) recently released draft regulations that, if implemented and passed, would shake up the video game market. According to them, manufacturers are forced to limit player spending, remove daily rewards for entering the game, and all items in loot boxes will have to be offered for direct purchase. In addition, any promotion of high-earning loot boxes will be banned.
The project shocked investors, leading to an $80 billion sell-off in shares of two of China's largest gaming companies, Tencent and NetEase. .
The new rules also impose a strict 60-day approval process for new games. But before that, the Chinese NPPA approved a batch of 105 games from Chinese companies within the country.
It is unclear whether the NPPA will change the rules. An $80 billion decline in the market value of Tencent and NetEase could prompt cost-saving measures and potentially lead to layoffs, studio closures, and the cancellation of a slew of projects.