China's Online Content Platform Removes Live Streaming Features To Prevent Gambling

Tencent Music has removed the live streaming feature that can be used for illegal gambling (photo: twitter TencentMusic)

Several Chinese online content platforms, including Tencent Music and NetEase Cloud Music, have removed live streaming features that can be used for illegal gambling, with a huge impact on their quarterly revenue.

Analysts say that these online content platforms disabled features such as virtual lottery after the government began taking firm action against live streaming in June, as part of further action against online gambling.

Although these platforms claim to ban gambling, analysts say that very popular lottery prizes are often manipulated by live streaming broadcasters colluding with audiences to share prizes.

According to research firm Analysys, these features have increased the popularity of live streaming, a market worth around 152 billion yuan (Rp317.2 trillion) in 2022.

"The government's crackdown prompted Tencent Music and Huya to "stop live streaming features containing coincidence games," said Ivan Su, an analyst at Morningstar, ending a lucrative source of income.

In a second-quarter earnings report posted last week, Tencent's online music division, Tencent Music, and its Twitch-like gaming broadcast platform, Huya, said their social entertainment revenue, which includes live streaming, fell 24% and 16% compared to last year's period.

On Thursday, August 24, Cloud Music, NetEase's majority music streaming service, reported social entertainment revenue, which accounts for about half of total revenue, also down 24% in the second quarter compared to the previous year.

However, none of these companies mention gambling action when reporting their earnings, and they did not respond to requests for further comment.

However, co-founder of the popular live streaming platform in Guangzhou, which declined to be named for the sensitivity of the topic, told Reuters that several popular live streaming and live chat apps should suspend services following a police investigation.

Local media also reported that between May and July, about 40 chat apps were immediately closed for "business adjustment".

"We expect this anti-judicial crackdown... will eliminate 20% to 70% of live streaming revenue, depending on the exposure of each platform," said Charlie Chai, an analyst at 86Research.

"It is estimated that it will take two quarters for the impact to be fully absorbed, one third in Q2, and the remaining two-thirds in Q3," he added.

In its earnings report, Tencent said it was adjusting its live streaming business to be more "centralized on music," while Huya said it was working to make the platform's atmosphere "healthier". Cloud Music said it was strengthening its "internal control mechanism... and adopting tighter monitoring of users' unnatural activities".

Although Chinese authorities say they have ended widespread regulatory action against their technology sector that has lasted for years, surveillance of it continues as Beijing seeks to correct social and business activities in accordance with socialist norms.

Online gambling remains a concern, with authorities saying in 2020 that the flow of cross-border funds for gambling poses a national security risk.

Chai analysts say some platforms removed lottery-like features in 2020 in response to regulatory stress, but introduced new ones later with minor modifications.