Chinese online platforms cut live streaming features over gambling concerns

Chinese online content platforms, including Tencent Music and NetEase's Cloud Music, have removed live streaming features due to concerns about potential illegal gambling activities. This move is expected to impact their quarterly revenues significantly.

The decision to remove features like virtual lucky draws follows a government crackdown on live streaming, aimed at curbing online gambling, Reuters reported. Despite platforms’ claims of prohibiting gambling, analysts note that popular lucky draws often involve collusion between live streamers and viewers to distribute prizes.

These features have positively impacted the thriving live-streaming market, valued at approximately 152 billion yuan ($21 billion) in 2022 according to research firm Analysys.

The government's actions led Tencent Music and Huya to "proactively deactivate live streaming features that involve games of chance," Ivan Su, a Morningstar analyst, was quoted as saying in the Reuters report. This move has curtailed a profitable revenue stream for these platforms.

In their recent second-quarter earnings reports, Tencent's online music division and its Huya gaming platform indicated a decline of 24% and 16% in their social entertainment revenues, which encompass live streaming, compared to the same period last year.

Likewise, Cloud Music, primarily owned by NetEase, revealed a 24% year-on-year decrease in social entertainment revenue for the second quarter. This category contributes roughly half of the platform's total revenue.

Online gambling remains a concern for Chinese authorities, with officials saying in 2020 that the cross-border flow of funds for this activity posed a national security risk. Several platforms took down lottery-like features that year in response to regulatory pressure but introduced new ones later with minor modifications.