Tencent Adapting to the Changing Online Climate

Tencent-Headquarters

For several years now the Chinese gaming industry juggernaut Tencent has been on a steady rise, leveraging the constantly growing PC and mobile gaming sectors all across China to spend heavily on solid financial deals, even spreading into the US business sectors, all while making bank on some of gaming’s most well-known names. Founded in the late 90’s, Tencent has grown steadily since the company’s shares opened to the public on the Chinese market in 2004, since when the giant conglomerate has made waves both in the Chinese gaming market as well as social media and the internet has a whole, running something like a Chinese-language Facebook-style service called WeChat.

Over the years, Tencent’s rise to power in China has also led to some powerful financial ripples across to the west, as the financial interest of its board has eyed and acquired stakes in numerous companies across the gaming divide, both putting money into some of the most well-known titles and, of course, making money off of their investments. The trend ranges far and wide, with somewhat varying results that haven’t always been on the best interests of western gamers–as Tencent naturally has a very strict management policy when it does intervene, coming off of the heels of China’s tight grip on games and entertainment and regulations that Tencent has always struggled with.

For instance, the company finished its complete acquisition of Riot Games in December of 2015, establishing a 100% investment in the company behind the popular MOBA League of Legends and taking complete control over the game’s distribution in China. However, despite Riot releasing statements about Tencent’s indirect involvement as a “silent partner” for the developers, numerous changes have been made over the years to League of Legends that show otherwise–such as massive and long-lasting change to the art assets of various characters and adjustments in League’s free-to-play system, all made gradually to increase the market appeal of the game to the Chinese sector.

These changes ranged from relatively minor adjustments to much more drastic ones. In one case, Riot Games suddenly switched to using Chinese art files for many of its characters, a change that left many of them with the surprising new art of a clearly lower quality, which lasted for months while new art was being worked on. In another case, one character noted for having a cigar in both his art and on his in-game model had it removed entirely to keep in-line with Chinese laws on the subject, to the annoyance of countless fans. Despite a Chinese company pushing these changes for the Chinese gaming sector, however, they were universal–taking place across every region’s League server. Many also cite Tencent for the tightening grip on players’ wallets, as Riot has both introduced a loot system since their acquisition and made the grind to unlock things in the game more difficult and grindy.

Beyond the world of MOBAs, however, Tencent has a heavy hand in the industry, even if that hand is only there to make deals and profit off of investing, and in many cases, the company has remained notoriously uninvolved in projects and studios it acquires. While it may come as no surprise that the media powerhouse has countless hands in the mobile gaming market, one that is currently a wildfire of popularity in China, what may be surprising is that Tencent’s own stake in mobile gaming includes their own pet project, Honor of Kings, which is frequently and consistently the top grossing mobile title across the country. More importantly for western gamers, however, are the other interests Tencent has holdings in; these include large stakes in the companies behind massively popular titles like both Fortnite and PUBG, as well as Clash of Clans, and smaller but notable percentages of Activision-Blizzard, and Ubisoft–which Tencent has been buying from Vivendi after the latter’s failed takeover.

Despite these varied and profit-rich holdings, however, Tencent’s recently shown a hefty and surprising drop in net worth over the past quarterly periods, which could have possible ramifications down the line for both the eastern and western markets. The problems largely came about because of the tightening control on mobile games and microtransactions in general, especially in China. This led to the delayed releases of both PUBG and Fortnite in Tencent’s own neighborhood, both of which were heavy investments licensed by the company to bring into one of the most populated markets in the world. Regulations also clamped down on Monster Hunter World’s release and yanked the game from the market just after release, hitting Tencent in the wallet thanks to its licensing of the game directly via Capcom.

The news hasn’t all been bad, however; despite the setbacks, losing a few key employees, and Tencent’s first restructuring in over half a decade, they are set to bounce back. Behind the scenes, Tencent is working with Nintendo and Microsoft, as well as fan-favorite SquareEnix, to release new products and bring in amazing games to a brand new sector, while also sinking capital into real estate, healthcare, and infrastructure to stay on top. And with Ring of Elysium, Tencent has also broken into the top-ten most-played list of games on Steam, showing a spread to the western audience they’ve always wanted.

What could this mean for PC gamers in the west? It’s hard to say this early, but with the world throttling down on mobile games and microtransactions, and with Tencent working on new major PC titles and developing a Windows 10 platform for PC gamers in China, it may well mean that one of the most funded gaming groups in the world doubles down on the PC sector for years to come.

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