From now on, minors (under 18s) will not be allowed to play online games at all from Monday to Thursday. While on Fridays, weekends and public holidays they are allowed just one hour of gaming between 8pm and 9pm. The Chinese Government is taking childhood addiction to gaming extremely seriously and playtime is (mostly) over.

For context, gaming is not the only sector that the Communist Party has taken the bazooka to this year. China’s four largest listed technology businesses have all been shown the limits of Chinese capitalism, as President Xi Jinping has, not so subtly, reminded Jack Ma (founder of Alibaba) & Co., who is boss. Money may talk, but it does not necessarily mean power in China. The share prices of the once high-flying BATX companies (Baidu, Alibaba, Tencent and Xiaomi) have taken a big hit in 2021. Xi Jinping will be announcing his 3rd term as leader (à la Putin) at the 20th Party Congress next year and he does not intend to let a few tech geeks ruin his shindig.

So, the Communist Party has a wider axe to grind than just against gaming, but let’s focus on this for today. With millions of Chinese gamers effectively taken out of the market, will this put an end to what is an enormous sector that has grown at a remarkable rate?

No.

Why? Because humans are hard-wired to love playing games. I do not just mean video games here, I mean all games. Whether we are talking about a toddler discovering how much fun it is to throw their toys across the room and watch their poor parents go fetch, a good round of hide-and-seek, or Cristiano Ronaldo returning to Old Trafford, playing games brings a smile to our face and appeals to something deep inside of us.

As Ryan Dalton observed in Scientific American:

“Playing is a universal human behaviour … play is unprompted and natural”

Ex-rugby pro turned author Ben Mercer hit the nail on the head, remarking:

“It's no coincidence that the games industry is the most lucrative entertainment on the planet. Aside from its economies of scale, it's because we can't resist playing games. They appeal to us at an essential level.”

I fully agree that video games are not always a good thing and excessive use can be harmful to children. The new rules in China may well be beneficial to the development of millions of the population. However, imagine being a Chinese parent living in a tier 3 city tower block, with little outdoor access. UNO! may be fun, but come on! The fact is that humans will always want to play, and in a world where huge swathes of people live in cities with limited space and almost everyone has a smart phone permanently in their hand, there is always going to be a powerful instinct towards video games. Play is an expression of freedom and simple fun. In Communist China, individual freedom is debatable, but Xi Jinping is fighting a steep uphill battle against video games that will not level-out. Love them or hate them, Mario, Luigi, Pikachu, Sonic, Lara Croft, Crash Bandicoot and all their friends are here to stay.

Frontier Developments and Keywords Studios (video game developers) are both UK-listed gaming businesses in our UK Smaller Companies Fund which have performed well to date, and we remain optimistic in their long term outlook.

Frontier are releasing a new Jurassic Park game, ready for the Christmas market, which we expect to be one of their blockbusters this year. Looking further afield, they have the much awaited War Hammer and Formula 1 Manager games in the pipeline, both capturing niche but loyal audiences.