Tencent to close its Penguin Esports video game streaming platform as industry feels the heat from more regulation, competition
- Six-year-old Penguin Esports, a Twitch-like platform, will cease operations and be removed from app stores by June 7
- Game streaming sites are up against a tough challenge from popular video platforms such as short video app Douyin
Tencent Holdings, China’s biggest social media and video gaming company, said it will shut down its game streaming platform in June, in a move analysts say is aimed at reducing costs after the company’s plan to merge Douyu and Huya was scuttled by the country’s antitrust regulators.
Six-year-old Penguin Esports, a Twitch-like platform, will cease operations and be removed from app stores by June 7, according to an announcement on the platform’s website on Thursday. Tencent attributed the closure to “changes in business development strategies” and said the platform stopped registering new users and live-streaming hosts on Thursday.
Tencent’s attempt to merge Douyu and Huya, two video game live-streaming services that it controls, was blocked by the State Administration for Market Regulation (SAMR) in July last year. The planned merger would have created a US$5.3 billion giant with almost 300 million monthly active mobile users, enabling it to take on Amazon.com’s streaming service Twitch, which is blocked on the mainland.
Penguin Esports is a much smaller player than Douyu and Huya, which accounted for 40 and 30 per cent of game streaming sales in China respectively, and 45 and 35 per cent of active users, according to SAMR. Under the merger plan, Penguin Esports would have been integrated with Huya and Douyu to form a new entity.
Mio Kato, founder of Lightstream Research who also publishes on fintech platform Smartkarma, said the closure of Penguin Esports was to “reduce costs and right-size [game streaming]” amid a regulatory crackdown and intense competition, and that Douyu could be next.
Game streaming sites are up against a tough challenge from popular video platforms such as short video app Douyin, operated by TikTok owner ByteDance, and anime and video streamer Bilibili, both of which are spending big to sign up hosts and buy rights to games.
“Intensified competition and the government’s tech crackdown has made it unviable [for Tencent] to support Penguin while having two larger competitors who are also losing money. The industry looks like it needs to consolidate,” Kato said.
Kato also said he doubted the viability of Douyu as a stand-alone business after the failed merger plan, and “it could eventually be wound up just like Penguin”.
New York-listed Huya reported a loss of 313 million yuan (US$49.2 million) in the fourth quarter last year, swinging from an income of 253 million yuan in the same period in 2020, while Nasdaq-listed Douyu recorded a loss of 193 million yuan in the December quarter last year, and a loss of 620 million yuan for 2021.
Tencent has been hit hard by Beijing’s tech crackdown aimed at curbing the “irrational expansion of capital” and with video gaming in the line of fire amid concerns about its impact on children’s health.
Pony Ma Huateng, founder and chief executive of Tencent, saw his 2021 remuneration drop by 25 per cent year-on-year to 44.1 million yuan, according to Tencent’s 2021 annual report released on Thursday. Tencent President Martin Lau Chi-ping received total compensation of 322.9 million yuan in 2021, down 24 per cent year-on-year.
Additional reporting by Che Pan
