Monster Hunter on hold as China hits pause on new video games

17 August, 2018, 21:43 | Author: Kristen Mcgee
  • A Tencent sign is seen during the fourth World Internet Conference in Wuzhen

Tencent Holdings' shares fell 3 percent after the Chinese internet giant announced the first decline in net profit in at least a decade, with poor performance in its gaming business to blame. China surpassed the U.S.to become the world's largest game market in 2016 and many American, Japanese and Korean game publishers rely on Tencent to distribute their games in the country.

Tencent was founded in 1998 and while its core business is in gaming, which accounts for about 40 percent of revenue, it also operates China's dominant social network, WeChat, which has more than 1 billion users.

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Income from smartphone games, one of its main revenue channels, grew 19% year-on-year but fell 19% on a quarter-to-quarter basis to 17.6 billion yuan.

"We are now approximately mid-way through this transition, and are seeking to mitigate the impact through various monetization initiatives elsewhere in our payment and related financial services", it said.

Tencent said payment and related financial services and its cloud services helped its "others" business category record an 81 percent revenue increase to 17.5 billion yuan.

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"China's whole online gaming industry is having some issues - not only because of regulation but also because Chinese gamers are becoming more mature and selective", Mr Shawn Yang, executive director for Blue Lotus Capital Advisors, said on Bloomberg Television.

Last year Tencent was one of several private Internet companies that had to inject funds into a struggling state telecom. This could change for better or for worse when leadership is re-established, but the destabilisation of the video game market increasingly calls for the country to gain control.

China's biggest social networking and gaming company said it's seeking to reinvigorate mobile game revenue growth, via deepening engagement with existing titles and potential worldwide monetization opportunities.

Other gaming shares were hit in the wake of Tencent's downbeat results, including Chinese rival NetEase which lost 4 percent while Japan's Capcom, which developed "Monster Hunter:World" tumbled 5 percent. Tencent has lost close to a third of its market capitalization, or around $170 million since its peak in January, but it remains as one of the largest public company in Asia with a market capitalization of almost $400 billion. According to the report, the company saw significant growth in Q2 with total revenue up 30% year-on-year to 73.7 billion yuan ($10.7 billion).

Tencent blamed its profit decline also on fewer investment gains. It said that the decrease was "mainly due to non-monetization of popular tactical tournament games and timing of new game releases".

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