China cracks down on online games

Online gaming operators in China are racing to rewrite their software in preparation for stringent new regulations, according to an industry analyst.

"The companies are looking at changing the game model to help the players reduce playing time," said Jim Sun, an internet and telecoms research analyst with Evolution Securities in Shanghai. 

The new regulations, which include tight limits on playing time and a ban on underage players in violent games, were announced earlier this year, and the government plans to begin full enforcement early next year.

"It is very complicated for companies to change the game structure. Most of them have put up trial servers, and they're trying to see the impact on game players," said Sun, who frequently visits and speaks with China's online game operators.

According to recent government data from the China Internet Network Information Center, the country has over 20 million online game players, about half of whom play hourly or monthly fees to play massively multiplayer online role-playing games. 

Companies affected by the new regulations include US-listed Shanda Entertainment, Netease, and China's local World of Warcraft operator, The9 Ltd. Company spokespersons could not be contacted by press time. 

Following reports of crime and suicides linked to gaming and internet use, China's government has become increasingly concerned by what it sees as the negative social effects of online games.

Government-controlled newspapers run regular features warning of the dangers of excessive online gaming and internet addiction. 

But Sun warned that the new regulations may be less effective than the government hopes. "The time limit could be almost useless, because the game player can start another account to play the same game or play another game," he said.

The government plans to prevent repeat play or underage play by forcing players to input their official ID card numbers before they can connect to a game. But this might also be ineffective, because players would try to use other people's ID numbers, for example, their parent's numbers.

A recent Deutsche Bank Securities report suggests that the new playing time limits are likely to have a negative impact on revenues for some online game operators. 

The games will be changed to discourage lengthy playing sessions by reducing experience points earned to half after three hours play, and to zero after five hours. This timer will be reset every 24 hours.

Sun said he expects that revenue will not be affected because games companies will simply increase their hourly fees if total playing time is reduced. Players will accept these increases, he believes.