Sunday, July 9, 2017

On the Video Game Market - Tencent, Addiction and more

  • Last week, in response to Chinese government comments that video games may be "harmful to the psychology of minors”, Tencent Holdings Ltd announced it would limit the use of its “Honor of Kings" smartphone app to one hour a day for players under 12 years old and two hours a day for users under 18 years old.  The firm also announced plans to introduce the game into the U.S. and European markets
  •  Note: Estimates suggest that Honor of Kings has over 163 million users each month.
  • Separately, in the study “Leisure Luxuries and the Labor Supply of Young Men”, which focuses on the U.S. market,  economists Mark Aquiar, Mark Bils, Kerwin Kofi Charles, and Erik Hurst suggest that computer gaming has led to a decline in workforce participation for men, ages 21 to 30, and said “As of 2015, men between the ages of 21 and 30 allocated 5.2 hours per week to recreational computer activities …
  • we can attribute the much greater increase in younger men’s computer time to a sizable improvement in technology for computer and video gaming, an improvement we would expect given declines in relative prices for computer and video games 
  • innovations to computer and gaming leisure may have dynamic effects on labor supply. It is possible that individuals develop a habit (or addiction) for such activities. …
  • Thus negative shocks to labor demand could have a persistent negative impact on labor supply via individuals first increasing their computer leisure, then developing a taste or skills for the activity.”
MY TAKE
  • Regarding actions by the Chinese government - It is likely that younger players will figure out ways to continue playing Honor of Kings or other video games and business dynamics for Tencent and other video gaming firms will remain strong.
  • Regarding video game addiction – While research on this topic is still at an early stage, various studies suggest that 10% of video gamers may be addicted. 
  • Regarding the impact on workforce participation – A challenge for families, communities and policy makers will be dealing with gamers that are drawn to virtual worlds, as an alternative to low wage/stagnant growth job opportunities.

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