Chinese video game tantrums cause Tencent to first drop in revenue

Chinese video game tantrums cause Tencent to first drop in revenue

The continuous attacks by the Communist Party on video games and the ban lists of banned titles cause the giant Tencent to lose a lot of money, which now has over a quarter of its income in the games division

If China had not attacked video games several times over the years, probably most Western software houses today would be in the hands of Tencent, a joint-stock company founded in 1998 and chaired by Ma Huateng , whose subsidiaries provide the most varied services in the field. entertainment, mass media, internet and mobile phones.

Since the Chinese giant entered the video game sector it has come to dominate it: in 2021, also thanks to brands for casual gamers much loved by those who play on smartphones such as PUBG, Valorant, Brawl Stars and Clash of Clans, it collected 32.94 billions of dollars, far exceeding the Japanese Sony, which has been active in the gaming sector for about 30 years.


Perhaps, if China did not continue to demonize video games, Tencent would not own most of the western software houses, but almost certainly the largest. For years, for example, the Chinese giant has been targeting Ubisoft , a French multinational with studios now all over the world, from Milan to China, passing through Abu Dhabi, with IPs such as Prince of Persia, Rayman, Assassin's Creed, Far Cry, Rainbow Six and Just Dance , just to name the best known titles.

The financial results of the French label in the last period have not been excellent, so much so as to cause the postponement of several video games and a strong squeeze in the expenses of the various branches and so Tencent in recent weeks has made up again with the Guillemot family, which with 15% hold the keys to the company. According to Reuters, the Asian giant that has already bought a 5% stake in Ubisoft in 2018 would have again expressed interest in increasing its stakes in the company by the current value of 5.3 billion dollars, aiming to become the majority shareholder.

We do not know if the marriage with the French will ever take place, in the meantime Tencent has "satisfied" itself with shopping for software houses such as Inflexion Games , a label based in Edmonton, Canada, composed of former members of BioWare, starting with CEO Aaryn Flynn , who has signed successful sagas of the caliber of: Mass Effect, Dragon Age and Star Wars: The Old Republic and PlayTonic, which instead consists of former Rare (British software house that in the 90s signed masterpieces such as Donkey Kong Country, 007 GoldenEye, Perfect Dark, Banjo-Kazooie) , downsized in talent after the purchase by Microsoft, although in recent times it has churned out the fun Sea of ​​Thieves.

In PlayTonic we find former Rares such as Gavin Price (head of the company), Chris Sutherland (main programmer of Donkey Kong Country ) and Steve Mayles. The Chinese investment will allow the British to develop a third chapter of their Yooka-Laylee, a 3D platformer that blatantly refers to one of the most popular video games of the vintage Nintendo 64 Rare: Banjo-Kazooie .


The news of the partnership between Logitech G and Tencent Games aimed at creating a handheld console entirely based on cloud gaming and which will support multiple services that take advantage of this technology, including Xbox Game Pass, has passed over in silence, given that it was disclosed in the middle of August. and Nvidia GeForce Now.

"Logitech G and Tencent Games share a common vision of the future of games and are committed to ensuring that the quality of the experience comes together perfectly to deliver on the exciting promise represented by cloud gaming," the two companies said. they say nothing about their platform's price and launch period.

“Cloud gaming uses data center servers to stream consumer video games. There is no need to download or install any PC or console games. On the contrary, the games are rendered and played on remote servers and users interact with them locally on their devices ”.


In short, to spend so much money on it, Tencent must have seen the proverbial goose that lays golden eggs in video games. And in fact the numbers prove you right when you consider that last year Tencent grossed $ 32.94 billion, mainly thanks to mobile video games including PUBG, Valorant, Brawl Stars and Clash of Clans .

A disproportionate figure if you consider that the veterans of the sector are far behind. Sony stops at $ 24.87 billion, Microsoft at $ 16.28 billion and Nintendo at $ 15.3. In short, over a quarter of Tencent's turnover derives from video games: its main rival at home, NetEase is in fifth position in the ranking of the software houses that invoice the most, with 8.37 billion collected in 2021.


Still, Tencent's second-quarter revenue fell 3% to 134 billion yuan ($ 19.8 billion) from the same period in 2021, while profits even plummeted 56% to 18.6 billion yuan. . Tencent has already run for cover, cutting around 5,500 jobs and dropping to 110,715 employees at the end of June, the first quarterly decline in the workforce since 2014.

Among the main causes, the war that the Communist Party has returned to wage on video games. When last year the Economic Information Daily , a Chinese newspaper affiliated with the official Xinhua news agency, the government house organ, compared video games to "opium of the spirit" calling them "electronic drugs", Tencent left on the field on the 10th in a single day. , 57% in Hong Kong, NetEase 15.7%.


In China, the publication of video games is not free: it is the government that establishes it through special lists. In April, Beijing started updating them again, adding new titles, but no new games from Tencent ended up in the list of allowed video games, which means that the company must rely on older and now less appealing titles such as "Honor of Kings ”To get revenue.

For its part, Tencent stated that the Chinese video game market is facing "transition challenges", while the international market is in a "post-pandemic digestion period", as people, being able to leave again, have resumed spend on other forms of entertainment. But the explanation does not fully satisfy, because although China actually continues to be affected by massive local lockdowns, the West fortunately has left behind the period of restrictions for Covid since the end of 2021, so I step it up in sales, which undeniably there was, it was actually heard in 2022. What the company cannot say is that the Communist Party is taking from it a huge market of about 1.5 billion potential gamers: the Chinese people.

This is a machine translation from Italian language of a post published on Start Magazine at the URL on Thu, 18 Aug 2022 06:06:20 +0000.