Tencent games revenue in focus after China blocks "Monster Hunter: World"

BEIJING/HONG KONG (Reuters) - China’s Tencent Holdings Ltd saw its stock tumble on Tuesday, wiping out around $15 billion in its market value, amid concern of a blow to its video game revenue after regulators blocked the sale of one of its blockbuster titles.

A Tencent sign is seen during the fourth World Internet Conference in Wuzhen, Zhejiang province, China, December 4, 2017. REUTERS/Aly Song

Analysts had widely expected “Monster Hunter: World” to be one of 2018’s biggest hits for Tencent, which licensed the game from Japan’s Capcom Co Ltd to sell on its WeGame platform.

However the game, where players hunt fearsome creatures, disappeared from the platform on Monday, days after its Aug. 8 release. Tencent in a statement said regulators had received a large number of complaints about the game, which has sold over eight million copies worldwide.

Shares in Tencent, which is set to report half-year earnings on Wednesday, closed down 3.4 percent, against a 0.7 percent fall in the benchmark Hang Seng share price index.

The stock has dropped more than 14 percent this year, losing around $160 billion in market value since peaking in January.

“People are very concerned about Tencent in the short-term,” said Douglas Morton, head of research, Asia, at Northern Trust Capital Markets.

He said the block follows concern over Tencent’s ability to monetize “PlayerUnknown Battleground” (PUBG). Tencent had to alter PUBG last year after the regulator deemed it too violent, but has yet to receive a license to sell the updated version.

Industry executives said many firms have been awaiting games sales licenses since March after the government earlier in the year reformed its content regulatory body and split up the State Administration of Press, Publication, Radio, Film & Television.

“The key here is, not only PUBG, but no games are able to get licenses now,” a person from Tencent told Reuters on Tuesday on condition of anonymity due to the sensitivity of the matter.

The person said staff were puzzled as to why sales of Monster Hunter: World had been blocked as it was less gory than other titles and had received its sales license before March.

“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,” the person said.

Tencent declined to comment beyond Tuesday’s statement. The Ministry of Culture and Tourism, which regulates the video games industry, did not respond to requests for comment.

Morton said he remained bullish on Tencent stock and that there is always regulatory risk in China versus the rest of the global gaming market.

“For us this (firm) is a medium-to-longer-term holding with a history of good investment,” Morton said. “I think the monetization (of the blocked games) will happen, it is just a matter of time.”

Tencent said customers who purchased Monster Hunter: World were entitled to a full refund until Aug. 20. It said they will be able continue playing the game but that the firm could not guarantee associated services would continue.

Reporting by Pei Li in BEIJING and Sijia Jiang and Meg Shen in HONG KONG; Writing by Brenda Goh in SHANGHAI; Editing by Michael Perry and Christopher Cushing