The world's largest game company continues its relentless expansion. Niko Partners analyst Daniel Ahmad talks to GameDaily about Tencent's aggressive business strategy.
In today’s games market, it’s impossible to avoid the reach of behemoth tech conglomerate Tencent. It’s become the world’s largest game company, and boasts holdings in a staggering percentage of the industry’s major developers and publishers. Tencent’s acquisitions business has been well-noted by now, but it appears the company is not content with its current standing; according to a new report from analytics group Niko Partners, 2021 has already seen aggressive expansion from the Chinese giant.
According to Niko’s data, as of May 10, Tencent has closed 51 video game related deals in 2021. That’s already more than the 31 in all of 2020 in just four-and-a-half months. To put things in context, this breaks down to roughly one new deal every 2.5 days. It’s an astonishing number to be sure, one that Niko Partners senior analyst Daniel Ahmad said is a result of a games market characterized by immense change.
“Tencent’s investment strategy is being shaped by the rapid pace of development and growth in the games market over the past few years,” Ahmad told GameDaily. “Both the pace of investments and types of companies that Tencent is investing in has increased over the past year.”
Tencent’s 2021 strategy is markedly different from last year’s. In January of 2020, the company said that it intended to slow its games business acquisitions strategy. Clearly that has not been the case. In fact, this year has seen accelerated investments and acquisitions equating to about 5 times more than in 2019. Claiming holdings--or outright full ownership--in major publishers and developers like Ubisoft, Activision Blizzard, Riot Games, Epic Games, Supercell, Platinum Games, and dozens more, Tencent has earned itself a reputation for being untouchable in terms of its industry footprint.
That doesn’t mean it doesn’t face challenges, though. According to Niko Partners’ report, some up-and-coming studios have managed to cut a bit into Tencent’s substantial mobile business. Particularly, miHoYo’s breakout hit Genshin Impact has managed to bring in more than $1.5 since its launch last September. Of course this is across PC, PlayStation 5, and Nintendo Switch in addition to mobile platforms, but as a fellow Chinese studio, miHoYo does present a challenge to Tencent’s ubiquitousness.
“It’s no secret that Tencent’s pipeline is stronger and more robust than most game companies, but a key concern is whether it can innovate at the same pace of newer companies such as miHoYo, or compete against the buying power of a company such as ByteDance,” Ahmad explained. “Tencent’s aggressive investment strategy in 2020 and 2021, as well as the creation of dedicated AAA development teams in China and abroad, suggests they are taking a robust approach to maintain and grow their lead in the games market.”
At least part of what makes Tencent such a force of nature is its ability to successfully adapt external IP for mobile platforms, Ahmad said. For example, the Tencent-owned TiMi Studios is responsible for the wildly successful Call of Duty: Mobile, and is currently developing the upcoming MOBA Pokémon Unite.
Further bolstering its strong position in the games market is the fact that Tencent can act as a one-stop shop for game development, Ahmad said.
“It is one of the only companies that has strong R&D, publishing and distribution capabilities. While other companies may excel in one of these areas, Tencent is a powerhouse in all three.”
Looking forward, Ahmad expects Tencent’s domination of the games industry to continue. The company has stated that it has ambitions to further expand outside of China, and eventually wants half of all its players to be overseas. Right now, Niko estimates that only 21% of all of its revenue comes from outside China, meaning that there’s ample room for Tencent to grow its western businesses.
At its current pace there’s no doubt that Tencent is capable of reaching its goals. 51 closed deals in the first four months of the year speaks to the company’s determination on this front. Expect the industry to keep a close eye on future business moves from the world’s largest game company.
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