Chinese online content platforms including Tencent Music and NetEase’s Cloud Music have removed livestreaming features that analysts say could be used for illegal gambling, at a hefty cost to their quarterly revenues.

Analysts say online content platforms pulled the plug on features such as virtual lucky draws after the government in June started cracking down on livestreaming, as part of a wider clampdown on online gambling.

While the platforms said they ban gambling, analysts said the extremely popular lucky draws are often manipulated by livestreamers colluding with viewers to share the prize.

These features have increased the popularity of livestreaming, a market which was worth around 152 billion yuan (S$28.3 billion) in 2022, research firm Analysys said.

The crackdown spurred Tencent Music and Huya to “pre-emptively disable livestreaming features that contain games of chance”, said Ivan Su, an analyst at Morningstar, cutting off a lucrative source of revenue.

In their second-quarter earnings posted last week, Tencent’s online music arm Tencent Music and its Twitch-like game broadcasting platform Huya said their social entertainment revenues, which include livestreaming, declined by 24 per cent and 16 per cent, respectively, compared to the same year-ago period.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

On Thursday (Aug 24), Cloud Music, a music streaming service majority owned by NetEase, reported social entertainment revenue, which accounts for about half of total revenue, also fell 24 per cent in the second quarter year on year.

None of these companies mentioned the gambling crackdown when they reported their earnings, and they did not respond to requests for further comment.

However, the co-founder of a popular livestreaming platform in Guangzhou, who declined to be named citing the sensitivity of the topic, told Reuters that several popular livestreaming and live chat apps had to suspend services after police probes.

Local media has also reported that between May and July, about 40 live chat apps were shut down for “business adjustment”.

“We expect the anti-gambling crackdown... to eliminate 20 per cent to 70 per cent of livestreaming revenue, depending on each platform’s exposure,” said Charlie Chai, an analyst at 86Research.

“It should take two quarters for the impact to be fully absorbed a third in Q2, and the remaining two-thirds in Q3.”

In their earnings report, Tencent said it was adjusting its livestreaming business to become more “music-centric” while Huya said it was working to make the platform atmosphere “healthier”. Cloud Music said it was reinforcing its “internal controls mechanism... and adopting stricter monitoring over irregular user activities”.

While Chinese authorities said they ended a years-long, wide-ranging regulatory crackdown on its technology sector, scrutiny has continued as Beijing looks to rectify social and business activities in line with socialist norms.

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

Analyst Chai said several platforms took down lottery-like features in 2020 in response to regulatory pressure, but introduced new ones later with minor modifications. Reuters