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Chinese platforms Tencent Music & NetEase Cloud Music Halt Live Features due to Gambling Crackdown

Updated: Jan 8

[Edited] In a bid to comply with the Chinese government's crackdown on online gambling, Chinese online content platforms, including Tencent Music and NetEase's Cloud Music, have decided to scrap live streaming features that could potentially be used for illegal gambling.

Logo of Tencent Music
Credits: Reuters

Analysts believe that these platforms have taken this step at a significant cost to their quarterly revenues.

The government's crackdown on live streaming, which began in June, has prompted online content platforms to remove features such as virtual lucky draws. While the platforms claim to ban gambling, analysts argue that these popular lucky draws are often manipulated by live streamers colluding with viewers to share the prize.

The popularity of these features has contributed to the growth of the live streaming market, which was valued at around 152 billion yuan ($21 billion) in 2022, according to research firm Analysys.

Tencent Music and Huya were among the platforms that proactively disabled live streaming features involving games of chance. This move has resulted in a decline in their social entertainment revenues. Tencent Music reported a 24% decline in social entertainment revenues in the second quarter compared to the same period last year, while Huya experienced a 16% decline.

NetEase's Cloud Music, which relies heavily on social entertainment revenue, also saw a 24% drop in the second quarter year-on-year.

Although these companies did not mention the gambling crackdown in their earnings reports, a co-founder of a popular live streaming platform in Guangzhou revealed that several platforms had to suspend services due to police probes. Local media also reported the closure of approximately 40 live chat apps for "business adjustment" between May and July.

Analyst Charlie Chai from 86Research predicts that the anti-gambling crackdown could eliminate between 20% to 70% of live streaming revenue, depending on each platform's exposure. Chai expects the impact to be fully absorbed over two quarters, with one-third in Q2 and the remaining two-thirds in Q3.

In response to the regulatory changes, Tencent stated that it is adjusting its live streaming business to focus more on music, while Huya is working towards creating a healthier platform atmosphere. Cloud Music mentioned reinforcing its internal controls mechanism and adopting stricter monitoring of irregular user activities.

While Chinese authorities claim to have concluded their regulatory crackdown on the technology sector, scrutiny continues as Beijing aims to align social and business activities with socialist norms. Online gambling remains a concern, with authorities highlighting the national security risk posed by the cross-border flow of funds for gambling.

In 2020, several platforms removed lottery-like features in response to regulatory pressure. However, they later reintroduced modified versions of these features.

  • Chinese online platforms, including Tencent Music and NetEase's Cloud Music, remove live streaming features amid a government crackdown on online gambling.

  • Analysts suggest that popular lucky draws were often manipulated by live streamers colluding with viewers.

  • The live streaming market was valued at around 152 billion yuan ($21 billion) in 2022.


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