China’s newly formed committee begins evaluating games

China is one step closer to approving commercial licenses for new games. The country’s state media revealed the formation of the Online Games Ethics Committee (OGEC) on Friday. This new oversight group has begun evaluating the appropriateness of game content looking to enter the market. The OGEC started with a group of 20 unreleased products. China has not approved a new game for sale in China since March.

But while this is a move in the direction of permitting new games to make money in China, the committee has not opened the floodgates. It did not approve a single one of the 20 games it looked at for sale. Instead, the OGEC rejected nine games, according to China Central Television (via South China Morning Post). The group is asking the developers of the remaining 11 games to make content changes to their products.

The CCTV news story is the first time China has revealed the existence of the OGEC. And that report did not go into to many details about how the organization works or why some games were denied.

What is going on in China?

The Chinese gaming freeze is the result of a bureaucratic reshuffling within the Chinese government. It has moved, dissolved, or given new leadership to the committees that previously oversaw the approval process.

But at the same time, the country’s government obviously has taken issue with the popularity of video games. It previously cited concerns about addiction and inappropriate content. And while the country is revealing little about the OGEC, the regulator seems serious about enforcing the government’s control.

The regulatory impasse is dampening the country’s enormous $38 billion video game business. Tencent, China’s biggest gaming publisher, has watched as its stock value has eroded over. The stock price hit a year-to-date high of $61 in January. Since the licensing freeze, however, it has dropped as low as $31.54. It has bounced back since that low in October, but it has still lost a third of its value throughout 2018.

But if China begins approving games once again — even through a strict regulation process — Tencent should have an advantage. It is close with the government. Tencent even has access to China’s national citizen database, which tracks and quantifies the behavior of people on an individual level. When it comes time to get its games approved, Tencent could use that relationship to ensure it knows exactly what the OGEC is looking for. These difficult business conditions should push even more foreign developers into the arms of Tencent for partnership deals.