The ambitions, dilemmas and puzzles of Tencent Games

Three people stood on the podium cheering, and there was a cemetery below, with many tombstones, each of which was a project. This is TencentWhen the star company Supercell invested in held an internal annual meeting, it once produced a cartoon. In the field of gaming, success is tense, with few winners, and great uncertainty.

The ambitions, dilemmas and puzzles of Tencent Games

  Coincidentally, Ma Xiaoyi, senior vice president of Tencent, once led the team to make a list: From 1990 to the present for almost 30 years, there are only more than 100 game production companies that can really be placed at the forefront. These can be counted as the “Pearl of Global Game Production Capability”.

  Of course, Tencent has made no secret of its ambition to attack globally. However, for a long time, Tencent’s path to solving its competitors has only two words: investment.

  When Tencent can really come up with a game that has weight in the industry and in the hearts of players, the global “ambition” of Tencent games can be regarded as having a real foundation.

 Tencent accelerates its overseas layout

  In September this year, Tencent reached a cooperation agreement with Ubisoft, a famous French game maker. On the premise of not interfering with Ubisoft’s operational autonomy, Tencent will increase its stake in Ubisoft by 5%, bringing its cumulative stake to 9.99%.

  In return, Tencent will obtain the distribution and adaptation rights of various Ubisoft games in China. For example, Ubisoft’s game/IP “Assassin’s Creed”, which is popular all over the world, may use Tencent’s hand to meet the majority of players in the form of mobile games in the future.

  Speaking of which, this is not the first cooperation between Tencent and Ubisoft. The friendship between the two has a long history.

  Tencent was once called the “savior” of Ubisoft by Polygon, a well-known overseas game media.

  At that time, the notorious Vivendi acquired Ubisoft maliciously. The latter was unable to survive on its own, and then Tencent took action and invested 5% of the shares, successfully preventing Ubisoft from falling into the hands of the devil.

  In addition to gaining friendship with Ubisoft and further releasing its goodwill to the overseas game market, Tencent has also obtained the distribution rights of Ubisoft’s various PC/mobile games in China, further making up for its R&D and IP reserves. Inadequate, accumulated strength in the upstream of the game industry.

  In fact, this idea of ​​exchanging investment for cooperation runs through Tencent’s layout in the overseas game market. With the support of banknote capabilities, this simple and crude way of overseas expansion has brought obvious development advantages to Tencent:

  In 2008, Tencent invested in Riot Games in the United States (Riot Games, which was completely acquired by Tencent in 2015), and won the exclusive domestic agency rights of “League of Legends”. The popularity of “League of Legends” in China is self-evident, and mobile games such as “League of Legends Mobile Games”, “Game of Genting” and “Honor of Kings” spawned by it have brought Tencent a lot of money. Economic returns, it is no wonder that Ma Huateng calls the investment fist as Tencent’s “most successful overseas investment”;

  In 2012, Tencent invested in Epic Games in the United States. While winning the Unreal game development engine and successfully cutting into the underlying core technology of the game industry, it also obtained domestic agents for games such as “Fortress Night” and “Unreal Contest”. right;

  In the same year, Tencent and Activision Blizzard in the United StatesReached strategic cooperation won the domestic agency rights of “Call of Duty”, and helped Activision Blizzard successfully get rid of Vivendi’s entanglement in 2013, and obtained 6% of Activision Blizzard’s shares in the form of strategic investment. In 2020, the “Call of Duty Mobile Game” jointly launched by the two has become one of Tencent’s tools to attract money overseas;

  In 2016, Tencent acquired an 84.3% stake in Finnish mobile game giant Supercell for $8.6 billion. This was the largest acquisition in Tencent’s history, and Tencent took over the agency of all mobile games under Supercell. rights, such as “Clash of Clans”, “Royal War”, etc., and also replaced Supercell to become the world’s highest-grossing mobile game company;

  In 2017, Tencent invested in South Korea’s Blue Hole Studio, won the exclusive agency rights of “PUBG Mobile” in China, and in 2018 cooperated with Blue Hole to launch “PUBG Mobile: Stimulating the Battlefield”, which has also become Tencent’s current One of the most popular mobile games overseas.

  The above are several key nodes of Tencent’s early overseas layout.

  It can be seen that almost all of Tencent’s overseas games are “imported”. This also reveals the inadequacy of Tencent’s self-research capabilities and original IP reserves. Although Tencent can use its banknote capabilities to fight internationally, for a company that wants to truly gain a firm foothold overseas and win the respect of more players, this is Far from enough.

  As for Tencent’s dedication to “end transfer”, it is rooted in Tencent’s accumulated advantages in mobile game R&D and operation, and conveys the overseas logic of “IP + end transfer + global distribution”.

  However, it is different from the early “Xu Xu Tu Zhi”. Since 2018, the issuance of domestic game version numbers has gradually tightened, the regulatory intensity of relevant agencies on game content has gradually increased, and the domestic mobile game market has become saturated, which has in fact entered a battle for stock, etc. Tencent has been in recent years. Significantly speed up the layout of the sea.

  Take this year for example. According to incomplete statistics from the competition, up to now, Tencent has initiated at least 12 investments in overseas game makers. In addition to increasing its holdings in Ubisoft, it also cooperates with SonyJointly invested in Japanese game maker FS, becoming the latter’s second-largest shareholder; after that, Tencent invested in Triternion, a Slovenian game maker.

  In addition to the investment, Tencent is also actively recruiting top overseas game talents. This year, Tencent recruited Ashraf Ismail, the former creative director of “Assassin’s Creed”, Nicolas Bouvier, the former art director of “Halo: Infinite”, and Shawn Layden, the former president and CEO of Sony North America.

A global gaming empire taking shape

  At present, the global game market can be roughly divided into 4 regions: Europe and the United States, Asia Pacific, the Middle East and Latin America.

First look at Europe and the United States.

  As one of the main battlefields in the game industry, Europe and the United States has always been at the forefront of the global game industry.

  With the high degree of maturity of the local market, as well as the solid economic foundation and good willingness of players to pay, Europe and the United States are the focus of early competition for domestic game manufacturers to go overseas, and they are also their first choice to go overseas. Funka and Lilith.

  The reason why they did not die in the domestic game market is that Tencent and NetEase were at that time. The battle between two tigers is being staged in China, so it turned to take the lead in laying out the overseas game market, especially in Europe and the United States, and finally returned strongly and became the other two major game publishers in China after Tencent and NetEase.

When facing a strong enemy that is difficult to defeat, sometimes avoiding its edge and attacking outwards can be regarded as a curved path to achieve a counterattack.

  Compared with Fun Plus and Lilith, Tencent, which has only gone overseas on a large scale since 2018, has indeed lost the first opportunity.

  However, Tencent’s early investment layout in Europe and the United States still established a considerable late-mover advantage for it.

  In the European game market in 2021 (only the German, British and French markets are included here), Tencent will firmly rank first for domestic game manufacturers to go overseas with revenue of US$375 million, far ahead of Fun Plus and Lilith.

Next, look at the Asia-Pacific region.

  The Asia-Pacific region has the largest number of players in the world, accounting for about 55% of the total number of players worldwide.

  With a huge player base, the Asia-Pacific market contributes as much as 49% of the total global game revenue, ranking first in the world.

  Due to the proximity of geographical location and the influence of the Confucian cultural circle, the Asia-Pacific region has become the first choice for many domestic game manufacturers to go overseas in recent years.

  Among them, South Korea has the deepest relationship with Tencent. For example, as we mentioned before, one of Tencent’s most popular mobile games overseas, “PUBG Mobile”, its IP belongs to South Korea’s Blue Hole Studio. Speaking of which, it is precisely because of the passivity in IP that Tencent has to sell a high revenue share, which is why it won the dominance of “PUBG Mobile” overseas distribution from Bluehole.

  In short, Tencent has a long history of cooperation with Korean game makers. Tencent has established close ties with the Korean game industry by investing in some companies. In July of this year, Tencent even applied to join the Korea Game Industry Association, in order to further enhance its voice and influence in the Korean game market, but the results are still unknown.

  Equally unknowable, there is Japan, which has always been called the “game island” by the outside world.

  At present, NetEase, which has successfully entered Japan with its “Onmyoji”, is still the largest domestic game manufacturer going overseas to Japan. Since then, NetEase, which has successfully seized the first “chicken-eating bonus” in Japan, has introduced “Wild Action” into Japan, becoming NetEase’s most profitable game in Japan. Japan has also become the bulk of NetEase’s overseas revenue.

  In contrast, “PUBG Mobile”, which is also a shooting game, entered the Japanese market later, so Tencent’s unhappy ending is also expected.

  On the road of the game going to sea, if you can’t seize the opportunity, or win by surprise, then you will take a slow step, a slow step, and it is very likely that there will be no room for a counterattack.

  But Tencent will never give up the Japanese market, and its “Apex Heroes Mobile Games” launched in cooperation with EA is launching a new round of impact on the Japanese market.

  In addition, Nikkei Chinese website reported in June this year that Tencent will plan to build a third data center in Japan, mainly for online live broadcast and game cloud services. According to the analysis of industry insiders, this is a further attempt by Tencent to build the metaverse, just as Tencent once proposed to “create a super digital scene that creates new value through game technology”.

In short, in this country where the second element is prevalent, Tencent’s operations have also become “dreamful”.

  Compared with the “retreat” in the Japanese market, Tencent’s layout in Southeast Asia is more realistic. Southeast Asia is also the focus of Tencent’s overseas expansion in the Asia-Pacific region at this stage.

  In fact, with the support of multiple factors such as the huge population size, the increasing Internet penetration rate year by year, and the gradual awakening of players’ awareness of paying, Southeast Asia has been regarded by the industry as “the most potential market” in recent years.

  In the past two years under the influence of the epidemic, when the number of gamers in most parts of the world has declined more or less, the three Southeast Asian countries of Indonesia, the Philippines, and Malaysia have grown against the trend.

  Unlike Japanese and Korean players who are more enthusiastic about RPGs, Southeast Asian players generally prefer games with strong social attributes such as MOBA and MMORPG. Specific to each country, the situation is different. For example, Indonesian players prefer chess and card and simulation games, Malaysian players prefer ultra-casual games, and players in countries such as Vietnam and Thailand prefer moderate-to-heavy games such as RPG and strategy games.

  In this complex battlefield, Tencent, which has a wide range of game categories, has a considerable advantage.

  For example, on the revenue/download list of domestic mobile games going overseas to the Southeast Asian market last year, Tencent’s “PUBG Mobile” and “AOV” ranked in the top five. “AOV” was recognized as “Honor of Kings” before Tencent launched “HOV”. overseas version.

  On the one hand, this is due to the attraction of these games to Southeast Asian players, and on the other hand, it is due to Tencent’s capital layout in the Southeast Asian market.

  Generally speaking, since Tencent lacks its domestic channel advantages overseas, in order to reduce the risk of entering the local market, Tencent often chooses to cooperate with local companies, usually accompanied by investment holdings. For example, when Tencent brought “QQ Speed” to Vietnam, it handed over the game to VGN, a local Internet company in Vietnam.

  Through its investment in local companies in Southeast Asia, Tencent has established a lot of advantages for itself to go overseas to Southeast Asia. Although this advantage is not decisive, why? We will refer to it later.

Look again at the Middle East.

  The impression of the Middle East to the outside world has always been mysterious religious culture, yellow sand in the sky, backward entertainment life, and the “unpretentious” of local tyrants.

  In the first half of this year, an Arab crown prince acquired a 96.18% stake in SNK, a veteran Japanese game company. According to rumors, the crown prince’s move is pure because he likes “The King of Fighters” under SNK.

  This can’t help but make people feel that the way rich people express their love is sometimes so unpretentious.

  More unpretentious, there are gamers in the Middle East. For example, in 2009, NetDragon, who was drawn into doubt about life in China, came to the Middle East with the mentality of trying it out and brought “Conquer” to local players.

  In the eyes of domestic players at that time, “Conquer” was definitely a web game on the bad street. However, in the Middle East, which was called a gaming desert at the time, “Conquer” truly achieved a “dimension reduction attack” and continued to bring profits to NetDragon for seven years. Since then, Longteng Jianhe also brought “Sultan’s Revenge” to the Middle East. This more thorough Middle Eastern game has brought greater benefits to Longteng Jianhe.

  After the success of the two, a large number of Chinese game makers, including Tencent, poured into the Middle East for a while, and the Middle East went from a “blue ocean” to a “red ocean” Chinese game makers.

  Tencent is the latecomer, killing the Quartet with “PUBG Mobile”. Data shows that in February this year, the market share of “PUBG Mobile” in the Middle East reached more than 55%, occupying an absolute dominant position.

  According to Chen Yu, President of Tencent Photonics Studio Group, in 2019, when he and his colleagues participated in the “2019 PUBG Mobile Star Challenge World Cup” e-sports competition in the Old Palace in Arabia in an official capacity, a project leader of the Old Palace told them that , downloaded “PUBG Mobile” on all three of his mobile phones. Before leaving, the Arab man did not forget to make a suggestion to Chen Yu and others, “Can you make some Saudi-style clothes in your game?”

Finally, look at Latin America.

  The “2022 China Mobile Game App Going Overseas Driving Force Report” shows that the Latin American market has become a new growth point for China’s mobile game going overseas, with a market share that has increased by 83% year-on-year in just five years.

  Among them, the Brazilian market is the most valued by the outside world, because based on Brazil, it can radiate the entire Latin American market. Game makers are gearing up to win in the Brazilian market.

  Tencent announced in June of this year that it would officially enter the Brazilian market and set up a local team here to allow “South America to manage South America and conduct more in-depth localization.”

  Mutong Technology also broke into this place with “Endless Showdown” and started localization attempts. As for Mihayou, he also competed for the local market with “Yuan Shen”, adding more uncertainty to the situation…

  All in all, by understanding the four major game markets of Europe and the United States, Asia-Pacific, the Middle East and Latin America, we can find that Tencent’s game tentacles are almost all over the world, and a global game empire that has begun to take shape has been formed.

Who can stop Tencent’s globalization pace?

Being rich is Tencent’s biggest advantage in going overseas. But looking overseas, it is not only Tencent that is rich.

Microsoft, Sony, Take-Two, etc. are also rich and have masterpieces of games. They not only have a higher status in the hearts of players at home and abroad but also adopt a buy-buy-buy strategy similar to Tencent.

  This year, there have been three major acquisitions in the industry. Microsoft announced the acquisition of Activision Blizzard; Take-Two acquired social and mobile gaming company Zynga; Sony acquired game production company Bungie.

  Among them, Tencent’s attention is probably the case of Take-Two’s acquisition of Zynga.

  Take-Two is a game company headquartered in New York, USA. As early as 1997, it was on the NasdaqListed, holding much well-known game IP. Zynga is also a game company located in the United States, which owns a variety of online social games and mobile games, and has a good reputation in the industry.

  Take-Two’s acquisition of Zynga at a high price now undoubtedly shows its ambition to increase the mobile game market.

For Tencent, the Take-Two premium mobile game is definitely bad news. Because Tencent’s main business overseas is mobile games. Nowadays, facing the trend of mobile games and GaaS (Game-as-a-Service, service-based games) of overseas game giants, Tencent will face more intense market competition.

  At the same time, competition from domestic overseas game manufacturers has also added more variables for Tencent to go overseas.

  A typical example is Mihayou.

  As a model for domestic game manufacturers to go overseas in recent years, Mihayou’s success is beyond doubt. With a two-dimensional style open-world game-“Yuan Shen”, Mihayou has literally opened up the global game market, which can be regarded as “one trick to eat all over the sky”.

  According to rumors, after the great success of “Yuan Shen”, Tencent tried to use its tried-and-true banknote ability to invest in Mihayou, but Mihayou, who was not short of money, was very tough, and Tencent was very impatient but could not do anything about it.

  Speaking of which, Mihayou and Tencent’s incompatibility is evident in the idea of ​​​​going overseas.

  If Tencent is taking a steady road of being keen on agency and casting a wide net, although it often makes it deeply passive; then Miha Wander is taking a professional road that focuses on self-research and cuts into a more detailed track.

  Although Mihayou’s idea of ​​”one way to the dark” is very easy to overturn, and the cost is extremely high, but if it can really go through, the results are obvious. Funka and Lilith are good examples.

  Fortunately, they succeeded; unfortunately, many more “they” failed.

  Because of this, it is not difficult for us to understand Tencent’s “seeking stability” mentality. It’s just that Mihayou’s global success has finally stimulated Tencent. No, Tencent won the overseas agency rights of “Magic Tower International Edition” at a high price not long ago. And Tencent’s move is also regarded by the outside world as “missing the investment in Mihayou, and even missing the tuition fee that needs to be paid in the two-dimensional market”.

  According to industry insiders, in addition to “Imaginary Tower International Edition”, Tencent will continue to increase the number of open world games. For example, the “Honor of Kings: World” that has been exposed, and more “moon landing projects” that have not yet been exposed – through one or two generations of product iterations, games of the level of “Cyberpunk 2077” and “GTA” are finally produced.

  In short, under the reverse incentive of Mihayou, Tencent, which is deeply threatened, is making changes.

  However, the domestic game makers that can make Tencent feel threatened are more than Mihayou. In addition to NetEase, which stabilized Tencent in the Japanese market, Mutong Technology, which was acquired by ByteDance in March this year, also suppressed Tencent in the Southeast Asian market.

  An intuitive example is Endless Showdown. As a weapon of Mutong’s overseas market, “Endless Showdown” has been operating in Southeast Asia for more than 5 years, but its popularity has not diminished. This year, with 47 million downloads, “Endless Showdown” ranked first in the download list of domestic mobile games going overseas to Southeast Asia, beating Tencent’s “PUBG Mobile” and “AOV”.

  In contrast, Tencent’s “AOV” is also popular among Southeast Asian players, and Southeast Asia is also the bulk of “AOV”‘s overseas revenue, but the too similar game content and mechanics, as well as the reality of entering Southeast Asia later, make “AOV” AOV” lost to “Endless Showdown” and was suppressed by the latter.

  Only in a small number of Southeast Asian regions represented by Vietnam and where Tencent has a greater influence locally, “AOV” has more advantages. As for where the “greater” influence comes from?

  This is thanks to what we mentioned before, Tencent’s capital layout in these regions. Unfortunately, due to the excessive reliance on local agents and Tencent’s lack of overseas game publishing experience before “AOV”, various versions of “AOV” appeared in Southeast Asia, which seriously affected its wider scope in Southeast Asia. promotion. Therefore, compared to the global server of “Endless Showdown”, “AOV” is once again at a disadvantage.

  As the so-called “blessing and misfortune depend on”, the failure of “AOV” made Tencent pay attention to the establishment of its own overseas distribution team, and chose the global server when releasing “PUBG Mobile” overseas, thus connecting the entire overseas game market. While “PUBG Mobile” is attracting money for Tencent, it also further expands Tencent’s influence in the overseas game market.

  As for “AOV”, it is likely to be abandoned by Tencent. An obvious signal is that on June 7 this year, Tencent officially announced that it will launch the real overseas version of “Honor of Kings” – “HOK”, which is expected to be officially launched at the end of this year. To a certain extent, “AOV” has become a “stand-in”.

  It’s a shame to say it, thinking that in order to cut off the competitor “Endless Showdown” for “AOV”, Tencent did not hesitate to take the latter to court many times. At present, the case has not yet come to a conclusion, but within the foreseeable time frame, the entanglement between Tencent and Mu Tong will continue.

  All in all, for its games to go overseas better, Tencent is also heartbroken. Although Tencent will inevitably face dual challenges from game makers at home and abroad on its way to the sea, for Tencent, since it has chosen the path of going overseas, it can only move forward.

  Going to sea, only forward

Once upon a time, for domestic game manufacturers, going overseas was just one of the options. However, as we mentioned before, whether it is the gradually tightening game version number distribution, the gradually increasing game supervision intensity, or the already saturated domestic game market, and the slightly exhausted game stock Competition and so on, all make “out of the sea, out of the game” has become the consensus of the industry.

  In this context, Tencent’s overseas expansion can be regarded as taking advantage of the trend.

  Tencent’s share of the overseas mobile game market has exceeded 20%, ranking first in the world, and “PUBG Mobile” has also occupied the top position in the world. At a time when the overseas mobile game market has a low degree of head start and the “mobile game window period” has not been closed, Tencent obviously has further capital and confidence.

  As a result, games have always been a major source of revenue for Tencent, currently accounting for about a third. In the fourth quarter of last year alone, Tencent’s overseas game revenue reached 13.2 billion yuan, accounting for 30.8% of Tencent’s total game revenue at that time.

  No wonder Ma Xiaoyi, senior vice president of Tencent, revealed to the outside world, “Before, I only spent about 20% of my time overseas, and most of my time was spent in China. Now, I spend 60% of my time in In the global market.” For Tencent, the overseas game market is such a gold nugget.

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