VIDEO GAMES
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Mobile gaming

Tencent, NetEase eye global breakthroughs in mobile gaming

Tencent generated revenue of 40.39bn yuan in the three months to September 30, including 18.17bn yuan from its online and mobile games business

PUBLISHED : Tuesday, 03 January, 2017, 12:48pm
UPDATED : Tuesday, 03 January, 2017, 10:24pm

Tencent Holdings and NetEase are looking to ratchet up their international mobile gaming expansion plans this year, using two very different strategies, to reinforce their position as China’s two largest video game providers.

Shenzhen-based Tencent is banking on its acquisition last year of a controlling interest in Finnish mobile game developer Supercell to push its initiatives worldwide, while Beijing-headquartered NetEase is expecting to attract a global audience with its in-house developed portfolio of titles across a variety of genres.

“The importance of quality game content is becoming more pronounced ... [as] players’ tastes become more demanding,” research analysts at Nomura said in a report last month.

Apart from being Nomura’s top picks in China’s video game industry, Tencent and NetEase were also the two largest Chinese game companies by revenue in the third quarter of last year.

Internet giant Tencent, which also operates popular social messaging platforms QQ and WeChat, generated total revenue of 40.39 billion yuan (HK$45.09 billion) in the three months to September 30, including 18.17 billion yuan from its online and mobile games business.

Nasdaq-traded NetEase posted 9.21 billion yuan in total revenue for the same period.

Nomura has forecast Tencent to continue growing its licensed titles, such as the multiplayer online role-playing games Tian Long Ba Bu from Changyou.com and JX3 from Kingsoft, as well as new WeChat-based games.

Its mobile games revenue, however, virtually all came from China, according to Nomura research analyst Shi Jialong. That is expected to change because of the Supercell deal, in which Tencent paid US$8.6 billion to acquire an 84 per cent stake from Japanese conglomerate SoftBank Group Corp and certain Supercell shareholders.

The transaction, announced in June, represents Tencent’s single biggest investment in a video games company. It also owns significant interests in US developers Riot Games, Epic Games, Glu Mobile and Activision Blizzard, as well as South Korean firm CJ Games and Japanese company Aiming.

In June, Tencent president Martin Lau Chi-ping credited Supercell for creating “innovative mobile games that are wildly popular globally”.

Founded in 2010, Supercell has brought four top-grossing games to market on Apple’s iOS and Google’s Android mobile platforms.

These include Hay Day, Clash of Clans, Boom Beach and Clash Royale, all four of which Supercell estimates as being played by more than 100 million people every day.

At an event in Shanghai last week, NetEase announced 12 new games titles for this year, eight of which are self-developed mobile games.

We are deeply committed to innovation that delights broad audiences both domestically and abroad
William Ding Lei, chief executive, NetEase

“We are deeply committed to innovation that delights broad audiences both domestically and abroad,” NetEase chief executive William Ding Lei said at the event.

Jefferies equity analyst Karen Chan highlighted in a report last week the new NetEase mobile game titles included Yongheng Bianjing, the company’s initial mobile first-person shooting game, and the mobile version of its action role-playing game Demon Seals, which will be available on the iOS platform in January 6, and adventure game Mist World.

“Netease will accelerate its overseas expansion plan in 2017 by releasing Onmyoji in Japan in spring, followed by the game’s English version in the US and European markets,” Chan said.

According to analyst firm App Annie, the anime-style Onmyoji was the third highest-grossing mobile game on the iOS platform in November, behind Japanese social network Mixi’s Monster Strike and Supercell’s Clash Royale.

Market research firm Newzoo has estimated China’s total games revenue last year reached US$24.4 billion, 56 per cent of which were from online desktop titles, 41 per cent from mobile games, and 3 per cent from boxed personal computer and console games.