Topline: The world’s leading game publisher, China’s Tencent, is reportedly hoping to break into the United States console gaming market by learning from its recent business partner Nintendo, according to the Wall Street Journal.
- Tencent develops popular free-to-play mobile games like Honour of Kings, holds stakes in Ubisoft (Assassin’s Creed) and Epic Games (Fortnite), and outright owns L.A.-based Riot Games, developer of PC game League of Legends, but the company isn’t directly launching console games in the U.S. like Nintendo.
- According to an unnamed Tencent official, the company wants to learn how to appeal to the U.S. audience, which rivals the size of the Chinese market.
- The report comes soon after more regulations were announced restricting video game playtime by minors in China.
- Tencent is currently working with Nintendo to get Switch hardware and software into the Chinese marketplace, which involves various approval processes.
- Nintendo investors have been heavily anticipating the move into China, though its president, Shuntaro Furukawa, has been downplaying the effect it will have on earnings given the country prefers PC and mobile over console gaming.
Key Background: Despite the size of the Chinese gaming audience and Tencent’s success at monetizing it with mobile and PC games, it’s an increasingly difficult marketplace. For nine months in 2018, China froze all new game license approvals, tanking Tencent’s stock in the process. It therefore makes sense for Tencent to push into the U.S. market, where console gaming makes up a far larger chunk of the country’s revenue.
Chief Critic: The U.S. gaming audience has pushed back against Chinese influence on companies like Activision Blizzard, which has been mired in controversy after banning a professional Hearthstone player for showing support for Hong Kong protestors during a broadcast. However, it may be all bark given Activision Blizzard’s Tencent-developed Call of Duty Mobile still had the second-biggest launch month ever for a mobile game, hitting 148 million downloads during the PR storm, according to market researcher Sensor Tower.