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Tencent Games’ Global Takeover: From Investment to Innovation

Tencent Games’ long-lasting battle in the global market is ushering in a wave of harvests that are difficult to detect.
On November 14, The Game Awards (TGA), known as the “Oscars of the gaming industry”, released the nomination list for 31 awards. Among them, the most watched award is the “Game of the Year”, “Border” “Gateway 3” and “Alan Killer 2” each received eight nominations, including the Game of the Year Award, and tied for the most nominated games in TGA.
On the same day, gaming media reported that Tencent was behind both. Overseas media Bloomberg also made a follow-up report after the TGA nominations were announced, commenting on Tencent’s investment in the gaming sector: “Tencent has proven that it has enough patience to pass its investment and is prudent enough to play a role behind the scenes in this famous industry. long-term layout in the ever-changing business.”
At the awards ceremony on the morning of December 8th. As the favorite to win, “Baldur’s Gate 3” deservedly won the TGA Game of the Year, as well as Best Performance, Best Community Support, Best Role-Playing Game, Best Multiplayer Game, Player Choice, etc. awards and become the biggest winner. Alan Wake 2, which also performed well, won awards for Best Game Direction, Best Narrative, and Best Art Direction.

“Baldur’s Gate 3” is developed by Larian Studios, one of the largest game studios in Europe. “City Circle” learned that according to a 2019 financial document from Larian Studio, Tencent Cloud Europe, a subsidiary of Tencent, holds 30% of its shares. According to media analysis, Tencent should have taken a stake in Larian Studios around September 2018, which coincided with the reorganization of Larian Studios and the establishment of a holding company in Ireland.

The developer of “Alan Killer 2” is the Finnish game company Remedy Entertainment. Tencent invested in the studio for the first time in 2021 and increased its stake in 2022.
In addition to the above two leading games, Tencent and Riot Games’ “League of Legends” and “Fearless Contract” also won all awards in e-sports related events. MiHoYo, also a Chinese manufacturer, won the best mobile game award for “Honkai Impact: Star Rail”.

Chinese game manufacturers are fully embracing globalization in their own and diverse ways.

The Age of Discovery enters its second half
“Seven or eight years ago, I wouldn’t have dared to think that Chinese games would have such a day.” At Gamescom, the world’s largest game show in Germany in 2023, an audience member who watched the opening video commented so road.
In front of the booth of the domestic 3A masterpiece “Black Myth: Wukong” developed by Game Science, there were crowds of people waiting to try it out. “You have to wait in line for at least two hours!” someone in the queue shouted to the latecomers.
At the opposite booth, miHoYo invited the Starry Sky band to cosplay game characters and perform original songs from “Genshin Impact” to open the show, turning the exhibition into a lively music festival and disco scene.
Level Infinite, Tencent’s international game business brand, debuted with 15 products, covering multiple categories and three major terminals: consoles, PCs, and mobile devices.
This Gamescom was called by the media as “the first large-scale independent participation of a Chinese company”. From a collective appearance in Cologne to winning multiple TGA awards, the current achievements of Chinese game manufacturers originate from the consensus of “If you don’t go overseas, you will be out”.

The latest data from Sensor Tower shows that nearly one-third of the top 100 highest-grossing mobile games outside China are developed by Chinese companies.
At the same time, the global gaming industry is also facing greater challenges. According to Newzoo data forecast, the global game market revenue will reach US$184.4 billion in 2022, a year-on-year decrease of approximately 4.3%. However, the revenue decline of the mobile game market in 2022 will be even more obvious, reaching US$92.2 billion, a year-on-year decrease of 6.4%.
The global game demographic dividend is gradually disappearing. After the short-term mobile game population growth caused by the global epidemic has passed, the global game population growth rate has dropped to 3-4%, which is nearly halved compared to the growth rate before the epidemic.
In the face of global market changes and pressure, going overseas has become something that Chinese game manufacturers must proactively think about and refine their layout.
As China’s leading game manufacturer, Tencent Games’ global layout can be said to have spanned more than 15 years. As early as 2008, Tencent invested in the American Riot Games. According to gaming media reports, Tencent Senior Vice President Ma Xiaoyi’s time spent overseas has increased significantly in recent years. “Before, I only spent about 20% of my time overseas, most of it in China. Now, I spend 60% of my time in the global market.”
In Ma Xiaoyi’s view, “China’s market is in a transition period from high-speed growth to a mature market. People have higher and higher requirements for product quality. There are basically leading companies in every category, but the entire game In this industry, the emergence of new ways of playing is rare.”

Nowadays, starting from the Chinese market, Tencent is positioning more and more products for globalization. “Internal products must target the global market as soon as they are launched. We will not make products for a single market. The products are Chinese IP. We also hope to The art style and gameplay are more adaptable to players around the world.”
It’s not just Tencent. The pace of globalization of major manufacturers is accelerating. NetEase has been recruiting people to build factories overseas since 2019, and this behavior will reach its peak around 2022.
In 2021, miHoYo has also accelerated the pace of globalization – the mobile and PC versions of “Honkai: Star Rail” launched this year have been simultaneously released in more than 150 countries and regions around the world.
In addition, miHoYo has also established R&D centers and offices in many countries with developed game industries, such as the United States, Canada and Singapore. In September this year, Cai Haoyu officially resigned as chairman of miHoYo. One of his key tasks in the future is to “connect domestic and overseas R&D resources.”
The fierce migration of Chinese manufacturers’ momentum overseas has also brought competition in overseas markets to a new level.
“The volume is too high.” A practitioner engaged in overseas distribution lamented to the “market”, “If you want to go to overseas markets now, you can’t do it without a budget of tens of millions, even in Southeast Asia, which is the cheapest. The market needs to start with a few million.”

a protracted battle
In the past few years, domestic game manufacturers have pressed the accelerator button in terms of capital, products, talents, technology and even the entire team going overseas. Based on their own genes and strengths, everyone’s path to sea is also different.
For example, NetEase’s approach to overseas expansion has always focused on distribution. In the Japanese market, NetEase became famous with “Knives Out”, and then relied on “The Day After Tomorrow” and “Identity V” to gain a foothold. Japan has become a blessed place for NetEase games. At least until 2021, NetEase games have been in Japan. It is a Top level existence.
In recent years, NetEase has also focused on recruiting Japanese console game development talents, and has successively established Sakura and Nagoshi studios to target 3A-level games. When it comes to game projects, NetEase also prefers medium to heavy games.
MiHoYo’s overseas expansion is more focused on its own products, overseas distribution and localization. By forming overseas teams focused on marketing, business, and localized R&D, MiHoYo focuses more on overseas promotion. With the advancement of internationalization strategy, miHoYo’s current games have been able to adapt to the “global team development” model.

The overseas strategies of “second-tier echelons” such as Sanqi Interactive Entertainment, Lilith, and Qujia are more about choosing the game track they are good at, such as starting from themes such as cards and SLG (strategy games), and through repeated modifications and optimizations Successful products in the early stage are used for overseas integration and innovation.
In comparison, Tencent’s overseas strategy is much more complicated, and it is closer to industrialization and systematic approach.
Tencent’s investment in Riot Games, an American gaming company, in 2008 was a landmark event. It can even be said to be Tencent’s most important investment in the gaming industry.
Although today’s “League of Legends” is enjoyed all over the world, in 2008, this could be said to be a risky move. Just because it took a fancy to the MOBA track and the free-to-play model that Riot Games planned to implement at the time, Tencent paid $8 million to Riot Games that year, which did not have a masterpiece.
In 2009, he made a bold move and acquired a majority stake in Riot Games, while promising to allow Riot Games to maintain independent operations.

Later, Tencent also invested in Epic Games and acquired Finnish mobile game developer Supercell, causing a sensation in the gaming circle. According to disclosed information, Tencent acquired Supercell for US$8.6 billion. Before Microsoft acquired Activision Blizzard, this was the largest acquisition in the gaming industry.

In fact, one of Tencent Games’ important business strategies has always been to invest extensively to reach out and connect high-quality game peers around the world. Ma Xiaoyi once shared Tencent’s strategy for making games in a speech: Among the three core driving forces of the game industry, namely story IP, gameplay and technology, gameplay is an important entry point. Every 2-3 years, a new gameplay will appear on the market. Therefore, only by expanding the track based on gameplay can we make the industry cake bigger.
Therefore, Tencent has been very active in scanning new gameplay methods globally and promoting category development and innovation. For example, in 2013, I experienced “DayZ” on the ArmA engine and invested in its developers. Then I cooperated with many tactical shooting game teams such as “H1Z1” and finally cooperated with the Korean company Krafton to develop the globally popular “PUBG MOBILE”. 》.
In fact, since 2018, Tencent Games has invested more frequently in overseas companies: Ubisoft in France, Digital Extremes in Canada, Sumo Leamington in the UK, Fatshark in Sweden, Inflexion in Canada and other global companies with their own strengths in different categories. Shi Jin has successively accepted investment from Tencent.
At the same time, Tencent has already begun to build its own global content self-research and global distribution capabilities, and to establish deeper cooperation with partners.

At this TGA, in addition to winning awards for its investment studio works, Tencent also debuted three new products. Including Lightspeed LA, a studio under the Photon Studio Group that specializes in open world 3A games, revealed its first game “Last Sentinel”, led by Steve C. Martin, a well-known producer who has produced “GTA5” and “Red Dead Redemption 1 and 2”. It has a very unique scene, plot and gameplay experience; Tencent’s international game business brand Level Infinite, together with Sharkmob Studio and 10 Chambers Studio, announced the new works “Exoborne” and “Den of Wolves” respectively. The former uses open world tactical evacuation shooting as its core gameplay. , the latter is a science fiction-themed multiplayer cooperative first-person shooter.

There is no doubt that TGA reflects that Tencent’s protracted battle has achieved a new round of results.
If going overseas is a game, then obviously the “difficulty mode” of the game has already been turned on. For example, Ma Huateng once said in a speech: “Getting the so-called boat tickets and tickets may not necessarily lead to the end.” Players from all walks of life are recruiting troops to win this battle. In October this year, Microsoft officially announced that it had completed its $68.7 billion acquisition of Activision Blizzard after receiving approval from the British antitrust regulator, the Competition and Markets Authority (CMA).
The magnates continued to build walls. According to reports, Tencent executives believed in an internal meeting that Tencent’s overseas actions in the past were just a “warm-up.” There is reason to believe that Chinese game manufacturers represented by Tencent, MiHoYo, NetEase, etc. have obviously become a force that cannot be ignored in the global game market.

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