Tencent, the Chinese technology juggernaut, is rapidly conquering the global gaming industry through its strategic acquisitions and investments in major game developers and publishers.
Tencent, the world’s largest gaming company by revenue, has been on a buying spree in recent years, acquiring stakes in dozens of game developers and publishers across the globe. Among them are several prominent US and UK firms that have produced some of the most popular and critically acclaimed games in the industry.
One of Tencent’s latest acquisitions is Sumo Group, a British video game developer that has worked on titles such as Sackboy: A Big Adventure, Crackdown 3, and Hitman 2. Tencent agreed to buy Sumo Group for $1.26 billion in July 2021, marking its biggest investment in the UK gaming sector. Tencent already owned an 8.75% stake in Sumo Group before the deal.
Sumo Group is not the only UK-based game company that Tencent has invested in. In 2019, Tencent bought a majority stake in Frontier Developments, the maker of Elite Dangerous and Planet Zoo. In 2020, Tencent acquired Leyou Technologies, a Hong Kong-listed company that owns several UK studios, including Splash Damage (Gears Tactics), Radiant Worlds (SkySaga), and Digital Extremes (Warframe).
Tencent has also been expanding its presence in the US gaming market, where it faces competition from rivals such as Microsoft, Sony, and Activision Blizzard. In 2015, Tencent acquired Riot Games, the developer of League of Legends, one of the most popular and lucrative games in the world. In 2016, Tencent bought a 40% stake in Epic Games, the creator of Fortnite and Unreal Engine. In 2017, Tencent invested in Activision Blizzard, the publisher of Call of Duty and Overwatch.
Tencent’s US investments also include smaller stakes in various independent studios, such as Dontnod Entertainment (Life is Strange), Paradox Interactive (Crusader Kings), and Bohemia Interactive (DayZ). In addition, Tencent has established its own studios in North America, such as TiMi Studios, which developed Call of Duty Mobile and Pokemon Unite.
Tencent’s strategy of acquiring and investing in game developers and publishers is driven by several factors. First, Tencent wants to diversify its gaming portfolio and reach new audiences and markets. By owning or partnering with different game companies, Tencent can access a variety of genres, platforms, and regions. Second, Tencent wants to leverage its expertise and resources to support its portfolio companies and help them grow. By providing capital, technology, distribution, and marketing, Tencent can enhance the quality and performance of its games. Third, Tencent wants to secure its position as a global leader in the gaming industry and fend off potential threats from competitors or regulators.
Tencent’s gaming empire is impressive and formidable, but it also faces some challenges and risks. For one thing, Tencent may encounter regulatory hurdles or political backlash in some countries where it operates or seeks to operate. For example, the US government is reportedly investigating Tencent’s acquisition of Sumo Group over national security concerns. For another thing, Tencent may face difficulties in managing its diverse and complex portfolio of game companies and ensuring their creative autonomy and cultural compatibility. For a third thing, Tencent may have to deal with changing consumer preferences and market dynamics that could affect the demand and profitability of its games.
Tencent’s gaming empire is not invincible or immutable. It is constantly evolving and adapting to new opportunities and challenges. It remains to be seen how Tencent will continue to shape and influence the global gaming industry in the future.