Tencent Losing Out As China Cracks Down On Gaming

Tencent's growth has slowed significantly as a widening regulatory crackdown in China weighs on its business, particularly its once-booming gaming division, Michelle Toh reported for CNN Business.

Photo Insert: Interior of the Tencent headquarters in Shenzhen, China

In its first earnings report since China imposed new restrictions on how long minors can play online video games, the company posted a big dip in usage and billings from children and teenagers.

Tencent's revenue was 142.4 billion yuan ($22.2 billion) during the three months ended September, a 13% increase compared to the same period last year. But that pales in comparison to growth rates of more than 25% it has posted in previous years. Profit rose just 3% year-on-year to 39.5 billion yuan ($6.2 billion).

CEO Pony Ma acknowledged the challenges in a call with analysts, saying that the entire tech sector had to adapt "to new regulatory and macroeconomic developments," especially with regard to "the domestic games industries and certain advertiser categories."

But "we are proactively embracing the new regulatory environment, which we believe should contribute to a more sustainable development path for the industry," he added.

In August, China barred online gamers under the age of 18 from playing on weekdays and limited their play to just three hours most weekends, a significant toughening of restrictions on the country's massive gaming industry.

Gaming companies, including Tencent (TCEHY), were also told by authorities to further clamp down on how minors could play video games — and focus less on profits in the process.

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