China gaming crackdown: Baidu to lay off over 100 from gaming unit amid regulatory crackdown, heavy losses

  • Baidu will significantly downsize its core video gaming development team and terminate services to games developed by outside studios, sources said
  • The company reported a net loss of 16.6 billion yuan for the latest quarter, after marking down investments of 18.9 billion yuan

Chinese online search engine Baidu is laying off at least 100 employees from its video games unit, as the company moves to trim losses amid Beijing’s ongoing crackdown on the sector, according to two sources briefed on the matter.

The Beijing-based company will significantly downsize its core games development team and terminate services to games developed by outside studios, two separate sources, who requested anonymity as they were not authorised to discuss the matter publicly, told the South China Morning Post.

The decision was announced to some employees this week, the sources said.

The exact number of staff to be let go is unknown. Baidu declined to comment.

The move by the Nasdaq and Hong Kong-listed firm is the latest sign that Beijing’s crackdown on video gaming has started to take a toll on the industry. China restricts gaming time for teenagers under the age of 18 at a maximum of three hours per week, and the Chinese government has suspended new gaming licenses since the end of July.

Baidu, which has been eclipsed in recent years by fast-growing tech giants such as ByteDance and Meituan, reported a net loss of 16.6 billion yuan (US$2.6 billion) for the latest quarter, after marking down investments of 18.9 billion yuan, according to financial result released last month.

The pullback in games comes as Baidu is investing heavily into “hard tech” sectors such as unmanned vehicles and semiconductors, but immediate prospects of turning a profit in these markets is remote given their technical complexity and rising competition.

In July, Baidu said it was undertaking a revamp of its gaming business, pointing out that it had a portfolio of 23 games. The company’s entry into video games can be traced back to 2013 when it acquired 91 Wireless and founded Duoku Game.

However, Baidu’s announcement of deeper involvement in the gaming business coincided with Beijing’s campaign to rein in video games over concerns related to gaming addiction among minors in the country. In August, a state media article labelled video games as “spiritual opium”, which was followed by the regulator’s decision to ban anyone under 18 from playing for more than three hours a week.

Chinese internet companies have been moving to lay off employees in recent weeks, as Beijing’s crackdown looks set to continue into the new year. Short video app operators Kuaishou Technology and TikTok owner ByteDance, as well as Baidu-owned video-streaming platform iQiyi, are all trimming their payrolls.

China’s video games market experienced its slowest revenue growth in three years in 2021 amid the crackdown, while the number of players stagnated, according to an industry report released last week.

The Game Publishing Committee (GPC) of the China Audio-Video and Digital Publishing Association, China’s state-backed gaming industry association, said in the report that the industry’s gross sales revenue grew 6.4 per cent in 2021 from a year ago, a sharp slowdown from last year’s 20.7 per cent growth.

The number of gamers in in the country also plateaued, rising just 0.22 per cent to 66.6 million this year compared with growth of 3.7 per cent in 2020, according to the report.

Author: Josh Ye, SCMP

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