Tencent's net income has fallen for the first time in a decade
Due to the fact that the Chinese government suspended the issuance of licenses for the release of new games in the country, the world’s largest game publisher began to have problems. Tencent reported a 2% drop in net income for the second quarter of 2018 compared to the same period last year.
According to Bloomberg, this is the first drop in at least the last ten years. For comparison, a year earlier there was an increase of 70%. Here is an important remark to the place. Tencent itself does not have such a graph as net income. By it, Bloomberg means the profit from the company, which falls on the shareholders.
Now, attention: he wasn’t the only one who fell. The entire company has also seriously reduced the dynamics of revenue in general. Last year, even adjusted for seasonality, quarterly revenue growth was more than 50% (compared to the period a year earlier). Now it is 30%.
In the context of the company’s gaming business, the situation looks more dramatic. In the second quarter of 2018, mobile games earned 19% more than a year earlier. It would seem that there is growth, but it is important to keep in mind that the growth a year earlier was 54%, and the year before that — 114%.
Another point adds fuel: compared with the results of the first quarter of 2018, the company’s mobile game sales fell by the same 19%. There is a temptation to say that January-March are traditionally quiet and not non-cash months for the market, but here it should still be remembered that February is the Chinese New Year.
Of course, Tencent itself does not blame the Party for the drop in sales. Instead, she carefully notes that such indicators are associated with the timing of the release of new games and the lack of monetization of popular competitive games.
Here Bloomberg suggests that Tencent is not only unable to publish new games, but has not received permission from the local regulator to earn money from the mobile version of PUBG at home.
The catastrophic situation is not only connected with the mobile sector. On the PC, the Chinese colossus also has problems. The government forced to stop selling the blockbuster Monster Hunter: World in the company’s PC service the day after the release of the game.
Plus, the Chinese release of the desktop versions of PlayerUnknown’s Battlegrounds and Fortnite, which Tencent was also supposed to deal with, have not yet been approved, and therefore remain in limbo.
Despite the unfavorable situation, some analysts believe that the company’s shares are still worth buying. From their point of view, as soon as the Chinese government reshuffles are over, the local regulator will start issuing licenses for publishing games again and everything will return to its circles.
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