What's Going On With Huya Stock Friday?

Earnings reports from last week indicate that Huya Inc HUYA and Tencent Music Entertainment Group TME saw double-digit declines in their social entertainment revenues, encompassing live streaming after they eliminated certain live-streaming features to curb potential illegal gambling activities. 

Additionally, Cloud Music reported a double-digit drop in social entertainment revenue for the same period.

The move impacted their quarterly revenues considerably after the Chinese government began a broader crackdown on online gambling activities in June.

HUYA's live-streaming revenues accounted for 89% of its total sales of $1.3 billion in FY22. TME's revenue from social entertainment services accounted for 56% of its revenue in FY22.

These platforms had integrated features like virtual lucky draws, which many believe could be easily manipulated by streamers in collusion with viewers to share prizes, Reuters reports.

Live streaming has soared in popularity in recent years. In 2022 alone, the live-streaming industry was worth 152 billion yuan ($21 billion), according to research firm Analysys.

Local sources suggest that many live streaming and chat apps temporarily halted services due to police investigations. 

Reports from local media indicate that approximately 40 live chat apps were taken offline between May and July for "business adjustment." 

Analyst Charlie Chai of 86Research anticipates that the crackdown could reduce 20% to 70% of live streaming revenue, depending on a platform's exposure to these features. 

He projects that it might take up to two quarters for the full impact of these changes to become apparent. 

Although Beijing has officially concluded its extended regulatory crackdown on the tech sector, it continues its surveillance, primarily aiming to align social and business operations with socialist values. 

Previously, China drafted new regulations for the live-streaming industry to limit internet users' daily monetary spending. China also looked to set a daily limit on live-streamers earnings and tighter censorship over the content.

Price Action: HUYA shares traded higher by 1.15% at $2.64 in the premarket on the last check Friday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.