Chinese online content platforms, including Tencent Music and NetEase’s Cloud Music, have removed live streaming features due to concerns over potential illegal gambling activities. Analysts suggest that these platforms took action after the government initiated a crackdown on live streaming, which is part of a broader effort to curb online gambling. While the platforms claim to ban gambling, analysts point out that virtual lucky draws, which have become extremely popular, are often manipulated by live streamers and viewers collaborating to share prizes.
The removal of these features has had a significant impact on the platforms’ revenues. Tencent Music and Huya were among those that preemptively disabled live streaming features tied to games of chance. In their recent earnings reports, Tencent Music and Huya revealed that their social entertainment revenues, including live streaming, dropped by 24% and 16%, respectively, compared to the same period last year.
NetEase’s Cloud Music, which is primarily owned by NetEase, also reported a 24% decline in social entertainment revenue, which accounts for approximately half of its total revenue, in the second quarter compared to the previous year.
Despite the impact on revenues, companies have not directly attributed these declines to the gambling crackdown in their earnings reports. However, industry insiders and local media sources have noted that numerous live streaming and live chat apps suspended services due to police investigations during this period.
Tencent is focusing on making its live streaming business more music-centric
Analysts predict that the anti-gambling crackdown could lead to a revenue reduction of 20% to 70% for live streaming platforms, depending on their exposure to these activities. They anticipate that the full impact of these measures will likely be absorbed over two quarters, with around a third in the second quarter and the remaining two-thirds in the third quarter.
In response to these developments, companies like Tencent and Huya are adjusting their live streaming strategies. Tencent is focusing on making its live streaming business more music-centric, while Huya is striving to create a healthier platform atmosphere. Cloud Music is reinforcing its internal controls and implementing stricter monitoring to address irregular user activities.
While Chinese authorities have indicated that the major regulatory crackdown on the technology sector has ended, they continue to scrutinize various activities to align with socialist norms. Online gambling remains a concern, as the government previously highlighted the national security risks associated with cross-border flow of funds for gambling.