Online platforms in China disable lucky draws to fight gambling

Online streaming platforms in China, to wit Cloud Music and Tencent Music, have shuttered specific live streaming features, notably the format of the lucky draw. This has been necessitated after the companies behind the services, NetEase and Tencent respectively, found out that streamers and viewers were in cahoots and divvied up the prize pools of the rewards, conducting what qualifies as illegal gambling in the process.

The platforms have acted preemptively as China is cracking down on illegal gambling and any attempts to gamble. The estimated market for lucky draw features in China before the ban was valued at $21bn, as per data based on 2022 numbers and consumer participation.

Although the services were profitable to the companies, the possibility of illegal gambling taking place on the platforms was enough to prompt the companies into action. Meanwhile, both NetEase and Tencent have reported a decline in their social entertainment revenues, tied to the decision to gradually restrict and now ban the lucky draw streams.

How much the dip will go is anyone’s guess, but 8Research analyst cited by Reuters, Charlie Rai, said that the expected decline in live streaming revenue because of this gambling crackdown should be anything between 20% and 70% of the live streaming revenue of companies.

Tencent and NetEase have in the meantime both confirmed in their latest earnings reports that they will move their businesses in this particular segment to be more "music-centric" and avoid the possibility of offering their consumers the chance to run gambling operations that are disguised as a legitimate service.

In cases such as these, authorities in Beijing tend to hold companies responsible for "facilitating" the transactions. Meanwhile, China has been really stepping up its efforts to restrict the outflow of national capital to gambling.

Even in-person cross-border gambling has been targeted, with Chinese customs officers instructed to inquire and discourage citizens from leaving on trips and gambling abroad. China has been collaborating with governments in Southeast Asia and pressured them to stop promoting gambling to Chinese nationals.

Macau, the biggest gambling hub in China, has been recently reregulated, and the government has put the onus on local concessionaires to pull further away from gambling and focus on attracting overseas tourists more so than Chinese nationals when it comes to gambling products of any type.

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