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ByteDance headquarters in Beijing. ByteDance has long sought to rival Tencent in gaming, and it recently made its biggest acquisition yet towards that end. Photo: AFP

TikTok creator ByteDance snaps up the maker of the biggest mobile game in Southeast Asia, putting on an esports collision course with Tencent

  • ByteDance is acquiring Moonton Technology for an undisclosed amount amid an ongoing lawsuit with Tencent, which alleges intellectual property infringement
  • Moonton’s Mobile Legends: Bang Bang is one of the biggest mobile games in Southeast Asia, where Tencent has struggled to make headway with Honour of Kings
TikTok maker ByteDance announced on Monday its biggest video game acquisition to date with Moonton Technology, which is being bought for an undisclosed amount by the company’s Nuverse studio, netting the tech giant one of the biggest mobile games in Southeast Asia as it seeks to rival Tencent Holdings as an equal in the industry.

Moonton is the maker of Mobile Legends: Bang Bang, which surpassed 1 billion downloads in November, according to the company. The acquisition gives ByteDance what could be its first esports-calibre title, something it has been lacking as it has sought to monetise its large social media user base through other channels, a strategy successfully deployed by Tencent.

“Moonton is definitely ByteDance’s best purchase as yet, whether in terms of scale or reputation in the industry,” said Liao Xuhua, a gaming analyst with Beijing-based market research firm Analysys. “In the short term, Moonton can very effectively strengthen ByteDance’s gaming business.”

The acquisition of the Shanghai-based studio is a pointed addition in ByteDance’s fight against Tencent. Moonton was created by former Tencent employee Xu Zhenhua, who was forced to pay Tencent 19.4 million yuan (US$3 million) in 2018 as compensation for breaking a non-compete clause in his contract with his former employer.

ByteDance sues Tencent over alleged monopolistic practices, escalating spat

Tencent’s fight with Moonton continues in a separate lawsuit in Shenzhen, which alleges Mobile Legends violated its intellectual property from hit titles Honour of Kings and League of Legends. The case opened in September 2018, and Moonton later attacked the judge in an open letter, accusing him of being influenced by Tencent. No ruling has yet been made.

The dispute between Moonton and Tencent has remained one of the most eye-catching lawsuits in China’s gaming industry. The ByteDance acquisition extends a lifeline to Moonton, and the company is likely shelling out billions of dollars for the privilege.

Sources told Reuters the deal values Moonton at US$4 billion. Liao estimated that the deal could be close to US$5 billion.

Owen Soh, founder of gaming consultancy Eastlab Consulting, called the deal a “big move by ByteDance to get into the esports space.”

Launched in 2016, Mobile Legends is a five-versus-five multiplayer online battle arena (MOBA) game, a popular esports genre. User spending in the game has increased every year since it launched, reaching US$214.1 million in 2019, according to Sensor Tower. That success is owed largely to the game’s popularity in Southeast Asia, where 44 per cent of gamers played Mobile Legends in the first half of 2020, according to game consultancy Newzoo.

Mooton’s Mobile Legends: Bang Bang is one of the biggest mobile games in Southeast Asia. ByteDance’s acquisition of Moonton gives the Chinese tech giant an important foothold in the region, where Tencent seeks to expand. Photo: Handout

Soh said that this deal could be the first of many acquisitions by ByteDance this year targeting expansion in esports and Southeast Asia. “The Moonton acquisition feels like there’s some urgency to not give up Southeast Asia to Tencent, as Tencent already dominates the esports space in China,” he said.

Liao of Analysys said Mobile Legends’ surprising dominance in the MOBA genre in Southeast Asia is largely a result of a disjointed strategy from Tencent in rolling out its premier mobile game, Honour of Kings, in the region.

Most countries do not actually get Honour of Kings, which is made for China, but rather receive a variant version titled Arena of Valor, which includes DC Entertainment characters such as Batman and Superman. But across Southeast Asia, Arena of Valor lags behind Mobile Legends.

Arena of Valor, China’s mobile League of Legends, is aiming to be the world’s go-to mobile esport

Honour of Kings’ overseas strategy has been very chaotic, with at least three different units having their fingers in it. Facing this kind of competition, it was hard for Moonton not to outdo Honour of Kings,” Liao said.

That situation has turned into ByteDance’s gain. The company has been looking to shore up its gaming offerings to become a more serious competitor to Tencent and NetEase, China’s two largest gaming companies by revenue. The company has made thousands of new hires in its gaming division in recent years, and it has found some success with casual mobile titles. However, it lacked a title like Honour of Kings that would transform it into an industry heavyweight.
The Moonton acquisition is also another way ByteDance is successfully copying Tencent’s playbook. Tencent has made many acquisitions and investments in its pursuit of overseas expansion in gaming over the years, most notably acquiring Los Angeles-based Riot Games, the studio behind League of Legends, and taking a 40 per cent stake in Fortnite maker Epic Games, based in North Carolina.