Tencent is cutting its gaming division’s marketing budget while it struggles with a regulatory freeze in China, according to Bloomberg.
The multinational conglomerate reportedly wants marketing executives to control their cash flow and curtail spending to “endure the hard times together.” Games without Chinese government licenses will have to return unspent money, Bloomberg said. Tencent also wants to cut spending on both underperforming games and games not coming out until 2019.
China’s gaming industry took a hit this year after the government said it was freezing the approval process for new titles. Epic Games’ hugely popular battle royale shooter “Fortnite” was one of the games stalled by the freeze. Tencent owns 40% of the studio. Chinese regulators also halted sales of Capcom’s “Monster Hunter: World” on Tencent’s WeGame platform after it said it’d received a large number of complaints about it. Tencent had pre-sold over one million copies of the successful action-adventure game and was forced to offer refunds.
Tencent is now undergoing its first restructuring in six years because of its recent troubles. It will reportedly consolidate three content business groups into one unit and create a new group for cloud and smart industries. It will also set up a technology committee to help strengthen its research and development and it will “further explore the integration of social, content and technology that is more suitable for future trends, and promote the upgrade from consumer internet to industrial internet.”
Tencent’s net profit fell 22% in the second quarter of fiscal 2018 compared to the first quarter. Smartphone games revenue was up 19% in the second quarter year-on-year, but it was down 19% compared to the first quarter. PC games were down 5% year-on-year and down 8% compared to the first quarter.
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