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A Virtual Ban: China Bans Minors From Tipping On Livestream Platforms

Buying and selling virtual gifts is "seriously damaging" the physical and mental health of users under 16, regulators say.

HONG KONG – China’s regulators have banned users under 16 from buying and sending virtual gifts on livestream platforms, further tightening the grip on the country’s livestreaming industry.

Under the new rules, livestream operators are banned from providing minors with services to top up their account, purchase virtual gifts and tip live streamers, according to a joint notice published on Saturday by the National Radio and TV Administration (NRTA), Cyberspace Administration of China (CAC) and two other government agencies. Businesses could be suspended or shut down if they violate the requirements.

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The latest change could impact China’s music industry, which relies heavily on social entertainment services such as livestreaming for revenue growth, analysts tell Billboard. China has the world’s largest user base of live-streamed short videos, which iiMedia Research projects will reach 660 million in 2022.

Revenue generated by tipping China’s music live streamers reached 39.73 billion yuan ($5.9 billion) in 2019, and the number is expected to grow to 81.12 billion yuan ($12 billion) in 2022, according to iResearch.

The new government rules are aimed at curbing online spending and creating a healthy environment for the growth of minors, regulators wrote in the notice. “The lack of responsibility of the platforms and the uneven quality of live streamers have led minors to indulge in livestreaming and tipping practices, seriously damaging their physical and mental health,” regulators said in the notice.

Before the ban, young users were able to purchase cash tokens and send virtual gifts to live streamers, a popular form of content monetization for livestreaming in China.

Regulators also barred minors from becoming livestreaming hosts, and demanded platforms to develop a “minor protection mode” and stop providing livestream feeds to minors after 10 p.m.

The announcement comes after China launched a two-month campaign in April as part of a broader plan to promote “healthy development” of online livestreaming and short video businesses. The government will focus on cracking down on “inappropriate content and tipping behaviors”, the CAC wrote in a note.

Livestreaming Emerges as a Money Maker

In recent years, China’s online music platforms have continued to strengthen their business layout around livestreaming, social services and supporting original music content after authorities banned exclusive music licensing deals.

Tencent Music Entertainment (TME), China’s largest online music company, has two thirds of its business, based on revenues, focused on karaoke and livestreaming services, according to the company’s 2021 Q4 report.

NetEase Cloud Music, TME’s biggest competitor, has developed a similar business model as TME with livestreaming generating 46% of its revenue in 2020, according to CMB International Securities.

The country’s livestreaming market — which consists of video game livestreaming and non-game livestreaming that includes entertainment, e-commerce and education — is expected to reach $76.42 billion in 2025, with a compound annual growth rate of 35.29% from 2021 to 2025, says market research company Koncept Analytics.

Regulators’ move to curb livestreaming could slow that growth. “Given the business’ revenue model, monetization has its own ceilings, as there is a limit to how much a user is willing to spend on virtual gifting,” says Charlie Chai, vice head of research at 86 Research. “This issue is more salient at a time of macro [economic] slowdown and regulatory tightening, where regulators ask platforms to reduce revenue-generating practices deemed inappropriate.”

During the coronavirus pandemic, Chinese artists turned to live broadcasts as a new way to connect with fans and to offset a falloff in publicity activities. Cantopop singer Eason Chan held his first live broadcast on Douyin, the Chinese version of TikTok, on Nov. 21, 2020. Before Chan, JJ Lin also held an online reveal for his new album, Message in a Bottle.

The spread of COVID-19 and strict measures restricting movement in China (intended to curb the spread of the virus) have further boosted the growth of online shopping and e-commerce. “In particular, livestreaming has gained prominence in recent years as a viable way to market, communicate, and sell products online,” consultancy PwC says in a research report.