SHANGHAI Jan 11 China's recent moves to
tighten control of its online and mobile content industries
have brought some uncertainty into the market but may not have
a major immediate impact on the sector's biggest players.
Analysts say the crackdown, which appears to be aimed at
pornography and other controversial content, could however
stunt the sector's prospects in the long-term.
By 2012, China's online game sector is estimated to have
230 million gamers compared with about 69 million currently,
and rake in revenues of 73.1 billion yuan ($10.7 billion),
Beijing-based research firm Analysys International said in
December. The industry's revenue was estimated at 26 billion
yuan last year.
Below are some questions and answers about the possible
impact of the latest crackdown.
WHAT ARE THE NEW RULES?
China slapped on the rules in November and December,
requiring online game operators to promote socialist values in
their titles and delete violent or obscene content. The
Ministry of Culture also requested game operators hire staff to
actively screen content in online games.
China's video broadcasting watchdog, the State
Administration of Radio, Film and Television, closed several
video sharing and music sharing websites in early December as
they did not have licenses, according to the official Xinhua
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On the mobile side, Beijing regulators closed more than
2,300 mobile websites due to "obscene content".
The crackdown comes months after another controversial
campaign tried to force PC makers to install Web-filtering
software on all PCs sold in the country. That campaign was
ultimately shelved due to international protest.
WHAT DOES THIS MEAN FOR INTERNET AND MOBILE FIRMS?
Based on previous crackdowns, China's Internet and mobile
content providers will have to tread carefully for the duration
of the campaign.
When China launched a similar anti-pornography crackdown in
2000, Internet portals NetEase.com (NTES.O) and Sina (SINA.O)
shares took a beating.
This time, analysts expect the impact to be more limited
for these firms, as all have diversified their business to
avoid too much exposure in any one area.
But less diversified players such as mobile Internet firm
KongZhong Corp KONG.O could be more at risk. KongZhong shares
fell 8 percent when news of the crackdown hit investor
sentiment on Nov 30.
Mobile content providers that work through China Mobile
(0941.HK), the country's dominant mobile carrier, must also
tread carefully after the company said in December it will halt
all payment of wireless application protocol (WAP) fees to
WHAT ELSE IS IN THE WORKS?
The crackdown is expected to last until the end of the
first quarter at least, and official media have quoted China's
culture minister as saying more rules were in the works for
online games. Those could impact operators such as Shanda Games
GAME.O, NetEase and Changyou (CYOU.O).
Last week, domestic media and analyst reports said two
government ministries were also planning new regulation of
China's social networking sites. With Facebook and Twitter
banned in China, many of the sites such as Kaixin001 and
Tencent Holdings (0700.HK) QQ Zone have seen business boom.
The new regulations, which could call for licensing and
minimum capital requirements for firms, could benefit larger,
more cash-rich companies such as Tencent as smaller players get
IS THE RECENT CASE INVOLVING NETEASE PART OF THE CRACKDOWN?
Yes and no. When NetEase applied for the license to operate
Activision Blizzard's (ATVI.O) popular World of Warcraft in
China, it ran into problems as Chinese authorities were
hesitant about the game's depiction of death and violence.
Since then, Beijing regulators have made clear their
intention to keep China's virtual world clean, which could
impact big name developers such as Electronic Arts ERTS.O,
and Activision Blizzard seeking to gain a stronger foothold in
However, most observers agree the controversy surrounding
NetEase and World of Warcraft was caused by infighting between
two government agencies, and was unrelated to the actual game.
(Editing by Doug Young and Anshuman Daga)