China’s Ministry of Culture released an updated set of rules last week that are set to go into effect on May 1st 2017. The new regulations are aimed at online game operators such as NetEase, ensuring that they comply with the existing and new laws in the online games industry.
The Ministry of Culture noted that the online games industry has been developing rapidly over the past few years but that the regulations put into place have not been clear and this has led to a number of online game operators not following the rules that were put in place to protect a user’s rights. The Ministry of Culture carried out a random check on 200 game operators recently and found that 36 of them were operating games with illegal content such as pornography and gambling as well as including contents abetting to crimes and “offending social morality”. The Ministry has urged the 36 game operators to co-operate with the government and learn from their mistakes. The new regulations announced this month include a few learnings from those investigations and also aim to bring more clarity to the current regulations that online game operators should be following.
The regulation that made the news last week is that the Ministry of Culture will require online game operators in China to disclose loot box item odds. Online game operators will need to disclose the name, property, content, quantity, and draw/forge probability of all virtual items and services that can be drawn/forge on the official game website or a dedicated draw probability webpage of the game. They will also need to publicly announce the random draw results by customers on either the official website or in game and keep those records for more than 90 days. These regulations will help make games fairer for players.
In addition, the new regulations mandate that online game operators require gamers to use valid ID’s for real name registration and that they must not allow anyone to login to the game or purchase a subscription/in game item without signing up first. Online game operators are also being told to limit the amount of money that gamers can spend per transaction when purchasing an in-game item or service. Two step payment confirmation via email or text will also need to be sent to the user every time a transaction is made. This will help stop accidental payments from young children or the user. The regulations in this paragraph aren’t exactly new, but they have been clarified slightly and the Ministry of Culture is clearly cracking down on game operators that do not follow these regulations.
The Ministry of Culture will continue employing random checks on online gamer operators and any violations will need to be fixed otherwise the online game operator could find themselves blacklisted and unable to publish games in China. A lot of the new regulations going into place on May 1st 2017 aren’t new, but they help serve as a reminder as to how publishers should be operating in China and it’s clear that China’s government will continue regulating the PC game market in a very strict way as they’ve been doing for years.
In addition to the above, the Ministry of Culture also issued a second document today with new regulations for the live streaming industry. The new regulations, which go into effect on January 1st, require online live video operators to apply for an Online internet culture license in order to continue operating. Live streamers that want to continue operating will need to register their real name and identity documents with the operator.
We note that there are around 300 different entities that offer live streaming services in Mainland China and that these new regulations are designed to cut back on vulgar or immoral content which has been live streamed in the past. The new regulations stipulate that any unlawful content such as violence, pornography, torture etc… are forbidden from being live streamed. The operators will need to self censor this content.
Video games are also affected by this new live streaming law. The regulations note that only games that have been approved and have a license to operate in China can be live streamed. This means that games like World of Warcraft, that currently have a license and operate in China via NetEase, can still be streamed online. But games such as Grand Theft Auto V which never got a license in China, and never will due to the violent content in game, will no longer be allowed to be live streamed. This can have a negative effect on Western games that are putting their games up on Steam, without a license to launch on a Chinese platform, and hoping for live stream covereage to promote the game.
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