Faced with the huge uncertainty of the Chinese game industry, the Internet giant Tencent has recently canceled some of its non-core marginal businesses and laid off employees in China while accelerating its investment in the global game industry.
In the past three years, Tencent has initiated at least over 141 game-related investment mergers and acquisitions globally. In 2022 alone, 10 of the 12 game-related deals initiated by the company were aimed at overseas manufacturers, including the purchase of a minority stake in Gruby Entertainment, an independent game development studio in Poland, and a 30% share acquisition of FromSoftwar, a Japanese video game development company, with Sony.
According to Chinese media outlet Huxiu‘s analysis, these moves were triggered by competitors such as NetEase, which has “Naraka: Bladepoint”, and miHoYo, which develops “Genshin Impact”. The investments are meant to bolster the company’s presence in the gaming field, but also helps the company set up a prominent position in advance to prevent missing out on popular games again.
The deep-seated reason is that the Chinese government’s restrictions on game approval and operation have had a fundamental impact on the survival of Chinese game manufacturers. Especially for leading game manufacturers like Tencent, the obvious lack of approval of game publishing means that there will be a backlog of gaming products waiting for approval, while popular games like the Honor of Kings have experienced a decline in revenue for the first time in the second quarter of 2022.
In addition, Tencent put forward as early as its annual game conference in 2020 that it hoped that the number of users of Tencent games would reach half at home and overseas, and would make greater efforts in the global market. At the end of last year, the company also launched its overseas game distribution brand “Level Infinite,” which was cited as being “the development of Tencent games as a global distributor” and a “reliable brand” entering the next stage of its development.
However, in this year’s second quarter financial report, Tencent game revenue in the international market was 10.7 billion yuan, and overseas revenue accounted for 25%, only 1% higher than that in the first quarter of this year. In order to improve the game business, Huxiu learned that the next globalization layout of Tencent Games includes three aspects.
First, Tencent will develop games for global players rather than only Chinese players. Many game products of Tencent‘s research team were designed as global products at the beginning of the project, rather than limited to a certain market.
Second, the company will keep an open attitude towards all platforms and create high-quality output that makes full use of the advantages of diverse platforms. Tencent has thousands of employees focusing on PC and console games overseas, and they will continue to try to add new gameplay to high-budget, high-profile gamesand console games.
Third, it will increase the deployment of local teams with established systems and scale, and build a global game collaboration system integrating research and development. By giving full play to Tencent‘s core advantages in mobile game research and operation, GaaS (games as a service), and e-sports, Tencent will cooperate more with global developers in cross-platform production and regional distribution.
Although the overseas market is large, it is not easy to stand out, and there are still many challenges. Game companies need to build an all-round system of talents, R&D and channels based on localization, and face the complicated situation of regional laws and regulations and copyright restrictions. It will take time to verify the development of Tencent‘s overseas game business.