Chinese gaming firms fret as approval freeze bites

Chinese games are waiting to be approved due to the implications of a regulatory hold- up

As the maker of familyfriendly games like “Gardenscapes” and “Toy Blast”, iDreamSky Technology never expected to get caught up in a tangle with Chinese regulators.

But the Shenzhen- based gaming company is enduring an unprecedented wait for over a dozen of its games to be approved for release in China, a situation it fears could impact profits this year.

iDreamSky is one of many Chinese gaming firms fretting over the implications of a regulatory hold- up that began in March and prompted Tencent ( 0700. HK), China’s largest social media and gaming company, to warn of slower revenue growth.

The reason for the approval slowdown appears to be the result of a bureaucratic reshuffle this year as China tightened its grip on content for entertainment ranging from video games to television reality shows.

Those changes have bogged down the approval process as the purview of each regulatory office is refined, industry insiders say. While analysts expect Tencent to bounce back thanks to its many business streams, they say many smaller companies that rely on a few game releases a year are at risk.

“It’s hurt us a lot,” said one iDreamSky employee, referring to the approval situation.

“This will have an impact on our business in the second half of this year and next year.” The employee spoke on condition of anonymity, citing market sensitivities.

iDreamSky, which is planning to list on the Hong Kong stock exchange, said in May it expected to launch 13 licensed and self- developed games in 2018 and 2019, in genres ranging from sports to puzzles.

The company was previously listed on the United States’ Nasdaq board and is backed by Tencent, which is its second- largest shareholder with a 20.65 per cent stake.

iDreamSky did not respond to requests for comment.

China overtook the United States as the largest single gaming market by revenue in 2016, and is expected to rake in $ 37.9 billion this year, up 17 per cent from last year, according to the research firm Newzoo.