Should We be Scared of Tencent?

Should We be Scared of Tencent?

The mastermind behind some of your favorite games isn't who you might think...

pocru by pocru on Jun 04, 2018 @ 12:23 PM (Staff Bios)
If you asked someone who the biggest company in video games is, you’d likely get a wide range of answers depending on who you asked. Someone completely oblivious to the games world might postulate “Nintendo”, since they’re the ones everyone has heard about and a lot of people mistakenly assume they own Pokemon. Others might say EA or Ubisoft, since in addition to running their own dev teams they also act as publishers for a number of other smaller, independent studios. You might trick yourself into saying Sony or Microsoft, since they’re like EA and Ubisoft but they have the additional size boost due to the fact they also make consoles - and in Microsoft’s case, basically owns a monopoly on PC gaming.

But that would all be wrong. The true biggest name in the video game world is likely someone you’ve never heard of. A shadowy group that has slowly been buying out the world’s biggest games and studios to create an unstoppable, money-generating monopoly. The true biggest game company is a Chinese investment firm called Tencent.

To call Tencent “big” would be a misnomer. Tencent Games (a 4.2 billion dollar branch of a parent company worth almost 37 billion dollars) owns Supercell (the developer behind Clash of Clans), Riot Games (creators of League of Legends), Netmarble games (a studio behind a number of big-budget korean MMO’s), Miniclip (online depository of free flash games), Bluehole (PUBG developer), Grinding Gear Games (the folks behind Path of Exile), and more. They’ve developed the mobile version of PUBG, published Dungeon Fighter Online, and backed Smite.

Still not impressed? They have their hands in other pies too. They’re heavily invested in Activision Blizzard and Ubisoft. They have a 40% share of Epic Games (which means they’re raking in cash from PUBG AND Fortnite), and have minor stocks in Robot Entertainment, the folks behind Orcs Must Die and other things probably.

All told, they’re making some major moolah. By comparison: EA, the biggest “traditional” developer, is worth only slightly more than that when put together, sitting at 4.5 billion dollars in total equity. Nintendo is worth, grand total, 9 billion USD. Ubisoft is sitting at 652 million USD. And while I can’t get specific numbers from Sony Interactive Entertainment or Microsoft Studios, their two parent companies are sitting on trillions of equity themselves.

So you might be thinking… alright, a trillion is a lot more than a billion, why am I saying Tencent is the biggest? It’s because we’re looking at grand total numbers here: when you ignore the operational costs and production and just liquidize everything. It’s expensive to be EA, and Microsoft, and Sony. But Tencent’s only operational costs are keeping the lights on and possibly losing money on an investment if they back the wrong horse, like when in 2016 they backed mobile developer Fireforge. And their total profits don't include the money that the games under them are making: that's just their slice of the pie.

There’s also the fact that Tencent just keeps growing. They eat up stocks and studios like they’re morsels in a buffet, and since they operate out of China there aren’t as many regulatory laws that could slow them down, the way we (in theory) have anti-monopoly laws in the US of A. So there’s been little to slow their shadowy rise to power, particularly a games-playing public who’s completely oblivious to the fact they even exist. Indeed, it seems as if nothing can really stop them.
The biggest question we should be asking ourselves, then, is should we. Is Tencent bad for the gaming world, and for gamers? Does it pose any kind of risk? Should we, to yank it straight from the title, be afraid of Tencent? And, not to spoil the rest of the article, but the answer is a solid “maybe”, leaning towards “yes”.

Specifically, if you’re worried that Tencent will bring about some kind of gaming-based death-by-assimilation future where everything is exactly the same, then there’s no real reason to be worried. One of the big plus marks many developers have reported when agreeing to work with Tencent was the fact that they have a long and storied history of non-intervention: they let studios do whatever they want (more or less, see below) and simply exist to take a portion of the pie when payday rolls around. To the best of our knowledge, the onlys studios that directly report to Tencent are the ones it owns and operates itself, which is a sizeable - but not massive - chunk of its holdings in the video game world. In fact, if you want proof of how hands-off Tencent is, I just need remind you that they’re behind both PUBG and Fortnite: Battle Royale, and they’re letting the studio they actually own, Bluehole, sue Epic. If there was ever a time where they might step in and try to be the adults in the room, that would be it, and yet Tencent is doing nothing of the sort. It’s clear they have a massive amount of respect for the studios who work under them.

That said, if you’re worried that Tencent will use the studios it acquires as a staging area to test new monetization and “engagement” tools, then you have slightly more to be concerned about. While Tencent is known and respected for being very hands-off as far as international releases go, their domestic releases (which is to say, Chinese) tend to have more of their fingerprints all over them. The mobile version of PUBG is full of the daily login rewards, loot chests, and other “goodies” we’ve come to see as normal in the gaming world (although thankfully there’s been some pushback). Tencent was very open about the fact that it would probably mess with the Chinese version of Path of Exile to experiment with new monetization and social options - which is relatively chilling considering the new implementation of the Sesame Credit system. And when you consider what Tencent does as a whole - which includes marketing, education, internet services, AI, big data, and more - it makes sense that they would also use their “foot in the door” to implement some light to heavy data harvesting/research for their other branches.
Plus, there’s always the very real chance they could reverse their “hands off” attitude and start getting more hands-on in the future. An unlikely situation, and one that will doubtlessly hurt their chances of buying future studios, but this could be implemented at a date when they have more products under their wing, and when studios would have an even harder time buying their own stocks back.

Looking at Tencent as a whole, the company appears to be fairly well put-together. What few controversies have rocked the company - ranging from standard “this game is exploitive and addictive” claims to accusations that they have no respect for copywrite (which is a common issue with all Chinese companies, as Chinese copyright law is extremely behind the times) - is nothing extraordinary, and they seem to have done a good job learning from those small mistakes moving forward. The question is, if they should start screwing the pooch hard enough, will we be able to notice and identify its their handiwork? Or will we just point fingers at the surface-level problem - such as when the Deus Ex team was railed for adding microtransactions to their latest game even though that was clearly a decision made by Square Enix.

To put it bluntly, I don’t think the game-buying public is sophisticated enough to actually take a stand against Tencent if it should ever be needed. I trust the games journalist world to more or less be on top of things, ever since Tencent played a hand in Activision/Blizzard’s “liberation” from Vivendi it's been watched very carefully, but our profession is often a thankless and attacked one, so even if we notice that all of Tencent’s latest games start making a turn to the worse, I don’t suppose enough of the game-buying public will be on board fast enough to make a difference. And that’s not to take us off the hook here: I’m sure if Tencent started doing something suspicious they would start with their mobile/South-east Asian games, realms games journalists basically ignore, before transitioning to the big leagues, if ever.

The long and the short of it is: Tencent is less of a “problem” and more of a “ticking time bomb”. It might never go off, it’s possible it’s just a dud and the studio is only really here to make money. But there still exists the chance that it could be a problem, and given how China is one of those “problem areas” in the world where change is desperately needed yet nowhere to be found, if we do discover the fuse is lit and it’s reared to blow there’s not a whole lot we can do about it, unless we can actually make a boycott stick.

But I don’t want to be needlessly alarmist. Tencent is here. It’s big. And as long as you know it exists, and you keep an eye out, then this article has pretty much done its job. Now let’s go back to hating EA, shall we?


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