How will marketers adapt to China's video-game restrictions for kids?

China is limiting the time minors can play video games to three hours per week—a strict new regulation that is expected to drive up the cost of advertising to the young demographic and upend marketing and influencer strategies in the market.

China’s National Press and Publication Administration released a notice on Monday (August 30) outlining measures to tackle video game addiction, which they said has an impact on both the physical and mental health of minors.

In order to impose the time limits, game companies will have to implement registration systems that require users to sign up with their real names and verifiy their identity with their government-issued IDs. Tencent started using this system in 2018 to limit play time on Honor of Kings. The company revealed in July it would deploy face-recognition technology to more effectively enforce the rules.

It may still be possible for young gamers to circumvent the restrictions by signing up on a foreign server.

Shares of Chinese game developers Tencent and Netease fell more than 3% on Tuesday morning.

While the news is not expected to be popular among China's millions of young gamers, it has prompted a mixed response from social-media users and industry experts. Some believe that gaming addiction is a societal problem that requires authoritative action. Others believe the way children spend their time should be determined by their parents.

Will Anstee, the chief executive of kid-focused advertising platform TotallyAwesome, believes gaming provides several benefits to children.

"Gaming has been propelled in society as a worldwide pillar of entertainment providing social connection, escapism and relief for millions of kids and teens during the global pandemic," he said. "In 2020 the World Health Organisation officially endorsed video games as a recommended social activity during the pandemic—truly evidencing gaming's ability to connect individuals, exercise mental health and make the world a smaller place." 

Anstee acknowleged that gaming "can be addictive", with average gaming time now up to some 80 minutes a day across most kid and teens age groups. But he believes the responsibility on keeping this in check lies with parents and carers, not the government. 

"It's all about moderation, as opposed to cutting off a kid's lifeline to their social groups and the greater global community—particularly in challenging times," Anstee said.

The restrictions will significantly limit the opportunities for marketers to tap young gamers in China, which could cause ad costs to skyrocket, according to Ben Chien, the managing director of Greater China at AnyMind Group.

"The under-18 segment...will become more premium than ever," Chien said. He predicts tightened restrictions on gaming would likely increase the novelty of the sector, leading to "an explosion of gaming growth each successive year". Both gaming influencers and developers will look to optimise their content format to tailor for this limitation, Chien said.

Marketers' ability to target this demographic will be dependant on how gaming platforms choose to attract, retain and monetise these audiences over the long run. For example, a gaming platform may increase inventory prices for this specific age group and reduce the frequency of ads, which would have a "profound impact on advertising for the future," he suggested.

"If a user is familiar with not having too many ads when gaming but starts seeing more ads for the same game when they reach their 18th birthday, this will ultimately lead to a diminished perceived user experience," Chien added.

Marketers may choose to target under-18s on other channels where there are fewer time restrictions.

"There is also an opportunity for more user-generated content by under 18s on social-media channels around gaming. From watching this content to learn how to optimise in-game time and strategy, to just reliving gameplay, we may well see a rise in new waves of young Chinese gaming stars, and also new opportunities for both advertisers and game developers," Chien said.

Greg Paull, the co-founder and principal of marketing consultancy R3, agreed that gaming influencers will find new channels, but expects resource to "decrease significantly across social media, variety shows and even professional gaming teams".

"There will be less money and less opportunities for gaming influencers. However, it’s important to remember that before gaming became mainstream, it was a niche industry fueled by die-hard fans. Those fans are not going to disappear. There will be new ways of engagement on the horizon," Paull said.

There's also a thriving over-18 demographic in gaming that will continue to make it an attractive marketing channel in the short-term, suggested Paull. In China, gamers between the age of 19-30 years account for about 31.7% of all users and 34.8% of paying users, according to Quest Mobile.

"Longer-term, it’s not going to be about eliminating gaming altogether from marketing strategies but taking into consideration that without high-levels of exposure, adoption is going to slow," Paull added.