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Tencent sees Q2 revenue dip thanks to China's playtime restrictions

China's recent restrictions on young players, and a lack of big releases, have resulted in Tencent's first ever decrease in revenue.

Due to China's recent restriction on young players, Tencent's financials have taken taken a decline for the first time in the company's history. Tencent recently posted its financials for the second quarter of 2022, and in both three and six-month periods, revenues had a loss ranging from 1 to 3 percent. 

China's National Press Administration enacted a law in late 2021 that limits players under 18 years old can only play games on weekends and legal holidays between the hours of 8 and 9 PM. A recent study by Niko Partners indicated that as a result, there are 83 million young video game players in the country, a 31 percent drop compared to the 122 million youths during 2020. 

In the three-month period for the second quarter of 2022, Tencent earned $134 million, down 3 percent from 2021's $138.3 million. For the similar six-month period, it saw a 1 percent decrease from $273.6 million (2021) to $269.5 million (2022). 

Tencent saw repeated growth in revenue and profit in previous years, and often from its mobile games

During its writeup for the quarter, the China-based Tencent referred to the playtime restriction law, and the subsequent profit loss, as a "transitional challenge." The effort to protect kids, along with a lack of big game releases and lower user spending, led to a 1 percent decrease in revenue across its various titles such as League of Legends and Honour of Kings

That said, amongst adult players, both Honour of Kings and Peacekeeper Elite saw an increase in playtime. And though it lacked large game releases, Tencent did note the growing popularity of its recent releases, such as Arena Breakout and Fight of the Golden Spatula. 

Internationally, Tencent was hit with another 1 percent revenue dip, though the company still referred to the market as "broadly stable." There was a decrease in revenue from PUBG Mobile and Brawl Stars, while Riot Games' Valorant remained steady, and the breakout hit V Rising continues to surge in popularity.  

Even with the revenue loss, Tencent said it remains optimistic about international games during what's being referred to as "a post-pandemic digestion period." 

China's new law won't keep Tencent, or its players, down for long

Though the new playtime law is having a noticeable impact on Tencent's revenue and Chinese players, things may soon be looking up. The aforementioned study from Niko determined that by 2026, Chinese player counts will rise to 115 million. 

Tencent is also reportedly aiming to up its stake in French publisher Ubisoft, and make further attempts to become the company's largest shareholder. Right now, it's unclear if Tencent would buy the company outright: Ubisoft CEO Yves Guillemont has previously insisted that any offer is on the table, so long as Ubisoft retains its independence. 

Games-wise, Tencent has continued its efforts to become a more prominent player in the international games market. It's either acquired or backed game developers such as Team Kaiju and TiMi Studios, and is working with tech company Logitech to create a new handheld system for cloud gaming. 

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