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A teenage girl plays the video game Fortnite, on an Apple iPhone X in Billerica, Massachusetts, on August 24, 2020. Tencent owns nearly half of Epic Games, an investment now facing scrutiny in the US. Photo: EPA-EFE

Tencent’s video game investments pick up under pressure from TikTok owner ByteDance

  • Tencent has already invested in 62 video game start-ups this year, double the number for all of 2020, as it buys up competition and wards off ByteDance
  • Tencent, the world’s largest gaming company by revenue, has been facing increasing scrutiny of its investments at home and in the US
Chinese internet giant Tencent Holdings, already the world’s largest video game company by revenue, is investing in gaming companies at a record pace this year, further padding an expansive portfolio as it seeks to ward off new competition from TikTok maker ByteDance.

The Shenzhen-based tech juggernaut, which derives a third of its revenue from gaming, had invested in a record 62 gaming companies by the end of June, according to video game research firm Niko Partners. That averages out to a new deal every three days.

The numbers this year are already twice that of 2020, when Tencent invested in 31 gaming companies, and five times higher than in 2019.

“Tencent has faced notable competition from tech giants such as Alibaba and ByteDance over the past year,” said Daniel Ahmad, senior analyst at Niko Partners. “[There were also] hit games by smaller game developers that became hits and threats [to Tencent].”

Tencent pushes busy slate of game releases as ByteDance rivalry intensifies

Some of the medium-sized companies that Tencent invested in had hit titles last year, Ahmad added, and they previously had no ties to the tech giant.

Alibaba Group Holding owns the South China Morning Post.
ByteDance has been especially aggressive in its move into gaming. The Beijing-based company has acquired at least eight gaming companies so far this year, including Moonton Technology, the maker of Mobile Legends: Bang Bang, the biggest mobile game in Southeast Asia. Its investment activities in China have also led to a bidding war with Tencent.
Start-ups miHoYo and Lilith Games have also seen some big successes this past year. Most notably, miHoYo’s Genshin Impact had the biggest global launch ever for a Chinese game last September, and it was the third-highest grossing game on mobile in the first half of the year, after Tencent’s Honour of Kings and PUBG Mobile.
Genshin Impact, with its anime-style visuals, had the largest global launch ever for a Chinese game in September. Photo: Handout

Tencent has only invested in one US company this year – JJ Abrams’ Bad Robot Games – as the Chinese company faces resistance from American legislators over national security concerns. Some of Tencent’s biggest past investments have been in the US, where it acquired League of Legends maker Riot Games and bought nearly half of Fortnite maker Epic Games.

“We note that Tencent has not invested in a US-based game company this year, which may be due to the geopolitical issues that led to the Committee on Foreign Investment in the United States looking into Tencent’s current stake in Riot Games and Epic Games,” Ahmad wrote in a research note on May 18, before Tencent’s investment in Bad Robot Games was made public.

Tencent’s investment activities have also been receiving more scrutiny at home, where the antitrust watchdog State Administration for Market Regulation (SAMR) has begun investigating the merger DouYu and Huya, two video game live-streaming platforms that have been likened to Amazon’s Twitch.

Regulators are also preparing to penalise Tencent for its dominance in online music streaming services, according to a recent Reuters report.

One silver lining for Tencent is that its hands-off approach to managing its portfolio could be helpful with regulators and its relationship with overseas companies.

“Tencent invests in a ‘silent’ manner, meaning that they do not rebrand their portfolio companies and generally leave those companies to continue the excellence that made them attractive to Tencent in the first place,” Ahmad said. “We call that Tencent’s silent pursuit of global gaming domination.”


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Serkan Toto, chief executive of consultancy Kantan Games, said there are still risks for foreign studios that want to do business with Tencent, but the tech giant’s momentum remains strong.

“Tencent being a Chinese company isn’t ideal for potential investment targets, but it seems that their terms and track record supersedes potential political concerns,” he said. “It also plays into the company’s hands that the current climate is not perfect, but clearly better than last year.”

Gaming start-ups, regardless of where they‘re based, still appear willing to take Tencent’s money. Canada’s Klei Entertainment and Swedish developer Dontnod are among foreign studios that have accepted Tencent investment this year.

“From a commercial perspective, working with Tencent opens doors to a broader audience given Tencent’s global influence and its fast-expanding distribution channels,” said Chundi Zhang, a video game analyst at Ampere Analysis, noting that the company produces games for consoles, PC and mobile devices.

This article appeared in the South China Morning Post print edition as: Tencent investment in game firms gains pace