Tencent Effectively Making Investments At All Levels Of Esports
Tencent is making investments at "all levels of the esports business: importing foreign competitive games titles to China, hosting arena competitions and buying up streaming services that broadcast the events," according to Christopher Cameron of the WALL STREET JOURNAL. Tencent already "dominates" China’s estimated $38B domestic games market, but tapping into esports more effectively would "bolster Tencent’s revenue from games." Tencent Chief Strategy Officer James Mitchell on an earnings call in May said that there were "substantial opportunities to make money with esports and the company was testing them out with 'League of Legends.'" He added that for now, Tencent’s philosophy was to "use these events to win over new and returning players." One challenge Tencent faces is how to "monetize esports in China as effectively as others do in the U.S." In China, Tencent is "filling stadiums with competitions for 'League of Legends,' a game developed by its subsidiary Riot Games." One event in May "achieved a peak audience of 127.6 million online viewers, the most popular esports event in history" (WALL STREET JOURNAL, 8/15).
TENSE RELATIONSHIP: THE INFORMATION's Ma & Osawa noted relations between Tencent and Riot Games have often "resembled a war game, forcing Tencent to cut costly deals to keep Riot happy." New details have "put a spotlight on how the two companies have clashed." In '14, Riot was "so dissatisfied with how Tencent was publishing 'League of Legends' in China that it opened its own office in Hong Kong to try to take more control of the game." The two sides also "disagreed over whether to roll out a mobile version" of the game. The feud "demonstrates the challenges with acquisitions in creative industries where the team creating a successful product has outsize power even when the business is owned by a much larger parent." Riot execs "insist relations with Tencent are good." Riot co-Founder & CEO Brandon Beck said, "We have a history of overcoming challenges and obstacles" (THEINFORMATION.com, 8/13). Meanwhile, Tencent said that its "net income for the three months ended in June" was $2.6B, a "decline of 2% compared to the same period last year," while revenue increased to $10.7B. Tencent said that revenue from online games had "dropped 19% from the previous quarter" to $2.6B, a swing it "attributed a lack of sales from popular tactical tournament games and the timing of new game releases" (MONEY.CNN.com, 8/15).
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