Tencent Games Strategy 2019 - Niko Partners
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Tencent Games Strategy 2019
China Games Market Intelligence: Tencent Games Strategy 2019
Tencent Games Strategy 2019
Tencent is a Chinese technology conglomerate founded in 1998. It is one of the top 10 public
corporations globally, by market cap, and is one of the world’s largest venture capital and
investment firms. Tencent’s success is at least partially attributable to WeChat and QQ, which are
two of the largest social messaging platforms globally (despite being used primarily in China). It is
also the largest gaming company in the world by revenue, having generated games revenue of $19
billion in 2018.
China’s games market was rocked by a temporary game license approval freeze between April
2018 and December 2018, which led to Tencent reporting its first profit decline ever. Despite this,
the company has been able to weather the storm and maintain its leadership position. This report
describes the bold strategy for games that Tencent has disclosed.
Tencent’s earnings and outlook for Q2 2019
Tencent reported Q1 2019 revenue of $12.69 billion, up 16% YoY, primarily driven by an increase
in Payment, Cloud and Advertising revenue. Operating Profit was $5.46 billion, up 20% YoY with
operating margin increasing to 43% from 42% last year. Total gaming revenue declined slightly to
$5.2 billion, down 2.2% YoY. The decline was due to lower revenue from both Tencent’s mobile
game and PC game segments.
Mobile game revenue declined 2.3% YoY, primarily due to fewer titles being launched during the
quarter when compared to the same period last year. There were 8 new mobile games launched
in Q1 2018 compared to just 1 in Q1 2019 (when licensing was just getting back underway).
Perfect World Mobile, which received a license at the beginning of the year, was the only new
game to launch during the quarter, generating revenues of over $100 million in its first month.
Perfect World Mobile is an RPG game for smartphones that has been adapted from the PC game
of the same name. The title is developed by Perfect World Entertainment themselves and
published by Tencent.
Existing (legacy) titles continued to perform well with Honor of Kings (known as Arena of Valor in
the West) remaining the #1 grossing mobile game in China during Q1 2019. Tencent saw an
increase in DAU across its mobile game portfolio and paying users increased quarter on quarter,
thanks to Chinese New Year promotions and the introduction of season passes and subscriptions
across PUBG Mobile, Honor of Kings, CrossFire Mobile and QQ Speed Mobile. Season passes in F2P
games were popularized by Fortnite’s battle pass last year and Tencent is currently experimenting
with this monetisation method in its hit legacy games.
2China Games Market Intelligence: Tencent Games Strategy 2019
PC Online game revenue declined 2.1% YoY, due to the lack of new title launches. League of
Legends remains Tencent’s hit PC game with user engagement and spend increasing over 2018.
We credit high user demand to the success of League of Legends esports with Chinese team
Invictus Gaming winning the League of Legends World Championships. Dungeon & Fighter has also
been a top performer with paying users increasing quarter on quarter after the Chinese New Year
update.
Tencent’s overseas games and earnings from investments also played a part as PUBG Mobile
reached 100 million monthly active users outside China and has now generated lifetime revenue
of nearly $400 million overseas. Tencent owns a majority stake in Supercell, who have published
another hit in Brawl Stars. The company owns minority stakes in Epic Games and Garena who have
found success with Fortnite and Free Free, respectively.
Q2 2019 Outlook is Positive
We expect games revenue to see a notable increase year over year as the company plans to
release Peacekeeper Elite, Game of Thrones: Winter is Coming, JX Online 3 Mobile, Once Upon a
Time, Fairy Tale Mobile, Ace Force Warrior and The Rhythm of The Clouds and Dreams. We expect
Peacekeeper Elite, which is Tencent’s new battle royale title, to be the standout game during the
quarter as players from the recently closed down PUBG Mobile migrate over and spend in the
game. The large portfolio of games set to launch during the quarter is also a positive sign for the
industry that Chinese game companies are returning to a healthy release schedule.
Peacekeeper Elite will be Tencent’s key title for 2019
Peacekeeper Elite launched on May 8, 2019 as Tencent’s new self-developed battle royale game
by Tencent’s Lightspeed & Quantum Studio, published by Tencent Games. The title launched with
zero marketing or announcement prior to launch yet is already set to become one of Tencent’s
most successful games ever. The game is essentially a carbon copy of PUBG Mobile with a few
slight changes, and conveniently launched the moment that PUBG mobile was shuttered.
Tencent closed PUBG Mobile in China on May 7, 2019 as the game, which had been on the market
since January 2018, had still not received a license that allowed Tencent to monetise the game in
China. Meanwhile, Peacekeeper Elite did receive a license to monetise in April 2019 and Tencent
decided that it’d be easier to close down PUBG Mobile and migrate all 150 million monthly active
users to the new game where they could be monetised, rather than continue to operate PUBG
Mobile with no way to monetise it.
3China Games Market Intelligence: Tencent Games Strategy 2019
Whilst an official reason was never given as to why PUBG Mobile was not awarded a license to
monetise, we note that an unofficial ban on Korean game IP and rules surrounding battle royale
games in China may have been contributing factors, because the original PC version of PUBG is a
battle royale game developed in Korea. A statement from China’s Audio-Video and Digital
Publishing association in October 2017 noted that battle royale games should strive to remove as
much violence as possible, incorporate Chinese values and take into account the health of minors
(who were spending many hours on such games).
As the game can be monetised, Peacekeeper Elite already has a store that sells skins, weapons and
other items. We expect Tencent to add additional monetisation options such as a battle pass and
more loot box options in the future. It’s clear to us that Tencent took a number of steps to self-
develop a battle royale game based on “domestic IP”, that did not utilise a Korean IP and explicitly
followed content regulations, such as removing blood splatter, in order to obtain a license. Great
news for Tencent, as they can now monetise a mobile battle royale game in China, yet not the
best of news for PUBG Corp who may not see any of the profit from Peacekeeper Elite’s operation
in China.
The game hit #1 on the iOS game revenue chart in China on day 1 (May 8th) and we note that the
game has remained at the top of the charts since launch, alternating between the #1 and #2
positions. We estimate that the game could generate gross revenues of over $150 million in its
first month and has the potential to gross nearly $1 billion by the end of the year, making the title
one of Tencent’s most successful games. Coupled with PUBG Mobile overseas, we believe that the
battle royale genre will be a key driver of growth for Tencent this year.
We note that Tencent has been able to launch battle royale games such as PUBG Mobile overseas
and Peacekeeper Elite in China whilst also adding battle royale modes to existing games such as
Honor of Kings and Call of Duty Online which has helped boost engagement and spend in the
games. However, Tencent is still looking to obtain licenses for Fortnite, H1Z1 Battle Royale, Ring of
Elyssium and Call of Duty Mobile Battle Royale to monetise these games in China. If Tencent is
able to receive licenses for these games, the company will be able to grow and enhance its
presence in the popular battle royale genre.
A growing pipeline of diversified titles will drive revenue growth in 2019
Tencent has taken a number of steps to grow and diversify its game portfolio to ensure that it can
have a presence across all gaming genres and create games for underserved segments of the
market. The company is carrying out this initiative by self-developing new games, licensing third
4China Games Market Intelligence: Tencent Games Strategy 2019
party games and by investing in and acquiring developers who can augment Tencent’s existing
game pipeline. This will give Tencent a greater presence across all gaming genres and segments,
allowing them to quickly respond to new trends and reduce any negative impact from new
regulations.
This is one of the ways that Tencent was able to weather the storm last year during a temporary
game license approval freeze when China’s gaming regulator stopped approving new licenses for
games whilst it restructured and reformed between April 2018 and December 2018. Despite being
unable to obtain new licenses for games, Tencent was still able to release more than 30 games
during this period as they already had a large number of games far along in development that had
been awarded a license prior to April 2018. This helped Tencent grow its gaming revenue 8.9%
YoY, which was down compared to 41.5% growth in the prior year, but it’s worth noting the
situation could have been much worse.
Domestic games
On March 24, 2019, Tencent held its annual UP conference where it showed 20 titles to
demonstrate how the company was enhancing its game software pipeline and diversifying its line-
up. Whilst a number of the titles were traditional RPG’s and Shooters, Tencent introduced new
Sandbox, simulation, survival, rougelike, and interactive games that are set to launch this year.
The company also focused on global games which are titles that the company plans to develop
and publish in China and overseas.
Key titles showcased during the event include:
Dragon Raja – A mobile MMORPG game adapted from Jiang Nan’s novel of the same name. The
game is said to be Tencent’s next generation RPG and will be developed on Unreal Engine 4 with
ultra-realistic graphics, an open world and more. Players will be able to explore the semi-futuristic
world of the novels and solve mysteries to save the world. The game is developed by Loong
Entertainment and will be published by Tencent. We note that the game has over 9 million pre-
registrations.
JX Online 3 Mobile – A 3D martial arts MMORPG game that is adapted from the PC game of the
same name. The game has a new unique art style that takes advantage of traditional Chinese
culture and art to immerse the player in the game world. Martial arts combat in PVE and PVP
modes is available and a new counterattack system will be introduced. The game is developed by
Seasun and will be published by Tencent in the second quarter of 2019. We note that the game
has over 12 million pre-registrations.
5China Games Market Intelligence: Tencent Games Strategy 2019
Ace Force Warrior – A hero shooter that combines shooter + MOBA + RPG elements with cartoon
style graphics. Players can choose to play from nearly 30 heroes in the game, each with unique
skills and weapons. The game also contains multiple game modes such as Assault, base occupation
and more. The game is similar to Overwatch in terms of gameplay and style. The game is self-
developed by Tencent’s More Fun studio group and is set to be published in the second quarter of
2019. We note that the game has over 8 million pre-registrations.
Game of Thrones: Winter is Coming – A simulation game based on the world of HBO’s popular TV
show, Game of Thrones. As the game is officially licensed by HBO, it utilises official character
portraits and storylines. In the game, players must plan, build, explore and battle opponents in a
real time strategy game to claim the iron throne. The game is developed by Yoozoo and will be
published by Tencent at the end of June in China.
ReEvolve – A sandbox game with stylistic graphics that contains both a PVE and PVP mode. In the
game, players must decide whether to save the world or end the world by exploring an immersive
open world where they will mine natural resources, craft new items and build defences. We note
that the title borrows a number of gameplay mechanics from already existing games such as
Minecraft and The Legend of Zelda to create a unique experience. The game is developed by
Perfect World and will be published by Tencent.
Code: Live – An open world co-op survival game with Shooter and RPG elements. The game has a
realistic art style and contains zombie hordes, similar to Days Gone and State of Decay. In the
game, players must survive together by building defences and fighting off zombies. The game is a
self-developed title from Tencent’s LightSpeed and Quantum studios.
Tencent has been self-developing titles since 2003 and some of the company’s most popular
games, such as Honor of Kings and League of Legends are developed by Tencent’s internal game
studios (Tencent purchased 100% of Riot Games in 2015). Tencent also acts as the operator for
overseas game developers who want to bring their games to China as a Chinese law states that
foreign developers cannot operate an online game in China themselves and must work with a local
partner. A trend that we have seen accelerate recently is Tencent publishing titles that have been
developed by fairly large domestic game developers, even those that have their own publishing
unit.
Recent games developed by domestic Chinese developers and published by Tencent include
Perfect World Mobile and The Rhythm of Clouds and Dreams from Perfect World Entertainment,
The World of Legend and Dragon Nest from Shanda Games, Game of Thrones from Yoozoo,
Dragon Oath from Changyou, JX Online 3 Mobile from Kingsoft/Seasun and Blue Moon Legend
from Kingnet. Despite having game publishing capabilities, themselves, more domestic game
6China Games Market Intelligence: Tencent Games Strategy 2019
companies are choosing to allow Tencent to distribute their game due to the company’s
experience, distribution channels and advertising reach.
Tencent has an advantage in China due to more than 20 years of experience operating social
networks in the country. QQ and WeChat have more than 1 billion users in China and are also used
as a distribution and advertising channel for games. Games that are published by Tencent are able
to use these social networks to their advantage, not just to distribute and advertise about the
game, but to fully integrate at every level including account log ins and payment. Chinese
domestic developers are discovering that working with Tencent to publish their game in China
would allow them to reach a larger audience than they ever could and allow them to earn more
overall than if they were to self-publish.
Foreign Games and Global Strategy
Tencent is a strong partner for foreign publishers due to its experience in video game
development and publishing. The strategy also includes investments in gaming companies that
augment its existing games and pipeline, picking up on trends for growth areas globally. Tencent
leverages its partners expertise when launching its own games and assists partners with game
development and localisation for the China market.
7China Games Market Intelligence: Tencent Games Strategy 2019
Tencent Games Investments / M&A (Foreign game publishers only)
Company Name Majority/Minority shareholder Stake (%)
Riot Games Majority 100%
Sharkmob Majority 100%
Supercell Majority 84.3%
Mini Clip Majority Undisclosed
Grinding Gear Games Majority 80%
Epic Games Minority 48%
SEA (Garena) Minority 39.7%
Activision Blizzard Minority 5%
Bluehole Minority Undisclosed
CJ Games (Netmarble) Minority 28%
Frontier Developments Minority 9%
Glu Mobile Minority 21.5%
Pocket Gems Minority 38%
Kakao Games Minority 13.5%
Ubisoft Minority 5%
Pati Games Minority 20%
Robot Entertainment Minority Undisclosed
Paradox Interactive Minority 5%
Milky Tea Minority Undisclosed
Fatshark Minority 36%
Tencent is the top partner of choice for game localisation in China, with foreign publishers such as
Actiivision, Electronic Arts, Take Two, Ubisoft, Nexon and others working with Tencent to localise
and publish their IP in China. Tencent has recently started to deepen its partnerships with foreign
game publishers, obtaining a license to develop and publish new and unique versions of foreign
game IP.
PUBG Mobile is the greatest example of this, with Tencent’s internal studios having developed the
game and published it outside China. The game has been a hit for Tencent on the global stage and
has generated gross revenues of nearly $400 million. Tencent recently obtained a license for the
Call of Duty franchise from Activision and is developing Call of Duty Mobile for a global audience.
Street Fighter Online is another self-developed title where the IP has been licensed from Capcom.
One other way that Tencent is aiming to grow its overseas presence is through the acquisition of
foreign game developers to create new games which will be published in China and overseas. This
8China Games Market Intelligence: Tencent Games Strategy 2019
strategy has worked for Tencent in the past with the acquisition of Riot Games and minority
investment in Epic Games, which allowed the company to become the largest PC game publisher
with League of Legends and Fortnite, as well as the acquisition of Supercell, which allowed
Tencent to become the largest mobile game developer with Clash of Clans. Tencent is currently
looking into acquiring Nexon, the publisher of Dungeon & Fighter, as the company is currently for
sale.
Tencent recently acquired Sharkmob, a Swedish game development studio that was founded by a
group of ex Ubisoft employees that worked on The Division. Sharkmob is currently developing an
online game with an immersive social experience for large groups of gamers across multiple
platforms that Tencent will publish in China and overseas. Tencent also announced a joint venture
partnership with Square Enix that will see both companies create AAA titles based on new IP,
create games based on existing IP and bring Square Enix titles to China. We hold a positive view of
Tencent’s overseas gaming strategy but note that there is still a long way to go before Tencent
becomes a household name in the West.
Tencent’s investment in Buy to Play helps them reach a niche segment
WeGame
Tencent currently dominates the free to play (F2P) PC and Mobile games market but has not had a
large presence in the Buy to Play (B2P) space on PC, Mobile and Console. This is primarily because
B2P has not been a big segment in China before and the investment was not worth it. Niko
Partners tracked the B2P market when games were sold as packaged discs for PC in the early
2000’s. These games were usually single player only, sold at retail and very expensive. Piracy rates
were extremely high for these games and it made the B2P market completely unviable for all
game publishers.
Over the past few years we have seen the rise of the B2P games market as digital distribution,
higher disposable incomes, DRM software to combat piracy and the growth of PC online game
distribution platforms in China has led to publishers being able to successfully monetise games
both at launch and post launch. Steam has been a key platform behind the rise of B2P games in
China, offering gamers localised games, local payment methods and a variety of popular foreign
AAA titles such as Dota 2, Grand Theft Auto V and Playerunknown’s Battlegrounds. Today, Steam
has more than 40 million active users in China and Valve is currently working with Perfect World to
create a China only version of Steam.
9China Games Market Intelligence: Tencent Games Strategy 2019
It’s important to note that the international version of Steam currently operates in a grey area as
none of the games on the platform have received a license from China’s gaming regulator to
launch and monetise in the country, yet the platform remains open and operable. This is also true
for other B2P game stores such as Ubisoft’s uPlay store, EA’s Origin store and Epic Games own
store. Today, B2P games on PC generate more than $600 million in China each year, accounting
for approximately 5% of total PC games revenue.
Tencent launched its own B2P PC game distribution platform in September 2017 called WeGame,
with the aim to distribute both domestic and foreign titles to gamers in China and take market
share away from competing platforms such as Steam. Unlike Steam, Tencent is playing by the rules
in China and requires each and every title to be approved by the gaming regulator before
launching the game on its platform. This means that Tencent offers a more stable platform for
publishers, but also requires foreign game developers to make changes to their titles to comply
with content regulations before they can request a license to publish in China. This process is long
and cumbersome which means many smaller developers will opt to publish games on Steam
where none of this is currently required.
Tencent held a WeGame developers conference on May 10, 2019 where it confirmed that the
platform now has 300 million registered users and 70 million monthly active users. Whilst these
numbers are certainly impressive, we do note that WeGame also hosts popular F2P games from
Tencent such as League of Legends which inflates the numbers. B2P game sales increased 56% YoY
in 2018 with standout titles such as Stardew Valley, Icey and Oxygen Not Included becoming top
sellers. Tencent also noted that there has been a rise in domestic B2P games as Chinese
developers have experimented with the business model. More than 5 million units of Chinese
developed games were sold on WeGame in 2018.
Tencent faces a number of challenges with WeGame due to content regulation laws and approval
times in China. The platform has more than 200 titles to choose from, but this pales in comparison
to the more than 5,500 games on Steam that have been localised into Chinese. In August 2018,
Tencent launched Capcom’s Monster Hunter World on the WeGame store. The title achieved
more than 1 million pre-orders, but every user was refunded after one week after regulators
ordered Tencent to remove the game as it did not comply with content regulations. The game has
yet to relaunch on the platform nearly one year later, likely because the game was resubmitted for
approval during the temporary game license approval freeze and has not been reviewed yet.
To combat these challenges and bring more compliant games to the platform, Tencent has
extended its Wings Developer Program to both overseas and domestic developers. WeGame will
now aim to partner with developers that are creating unique and content compliant games to
provide them with resources and support to help develop the game and launch it on WeGame.
10China Games Market Intelligence: Tencent Games Strategy 2019
Tencent is also improving the platform itself with a better review system, improved voice chat
capabilities and a new customer support program. As Tencent uses WeGame to distribute F2P PC
games too, we believe that the discoverability for B2P games on the platform is high and expect
sales of these games to increase as more titles come to the platform.
Nintendo Switch
Tencent confirmed on April 26th, 2019 that it would be the exclusive distributor of Nintendo
Switch hardware and software in China, marking an official entry into the console market for the
company. Consoles have not been a focus for Tencent in the past due to the console ban which
lasted from 2000 through to 2014. Whilst grey market consoles were popular during the console
ban, it is clear to us that the ban had a notable impact on the potential size of the market as
console games and brands were not localised or promoted in the country. Even with the ban
overturned, the console market only accounts for approximately 1% of total games revenue in
China.
Tencent has attempted to launch console hardware in China before, based on Windows and
Android, with zero results as they were expensive and failed to offer anything unique. Whilst the
Nintendo Switch can still be considered expensive for China, it will likely be priced cheaper than its
competitors and will offer a unique gaming experience that is different from its competitors.
Nintendo has already taken steps to increase the appeal of the device in China by removing region
lock, localising software into Simplified Chinese and published games that take advantage of the
portable and tabletop gaming modes which play into the social gaming culture in China. We note
that grey market sales of the Nintendo Switch have been particularly strong which is a positive
sign for the official launch.
The Nintendo Switch can be successful in China, especially due to Nintendo’s strong first party IP
such as Mario and Pokemon which are also known in China. Tencent has already released Arena of
Valor on Switch and we expect them to bring other games and perhaps even services such as
WeChat or even Tencent Instant Play to the Switch in order to support the launch and pitch the
console as a HD dedicated gaming device to compliment already existing PC and Mobile game
hardware on the market. Nintendo has a chance to surpass PlayStation as the market leader in
China, but we should note that the console market in China will always remain niche due to the
high barriers to entry.
The Nintendo Switch has already been approved for sale by the Guangdong Ministry of Culture but
requires further approval from the State Administration of Press and Publication and a China
Compulsory Certificate before it can be distributed in the country. Software for Nintendo Switch
will also require individual approval from the State Administration of Press and Publication before
11China Games Market Intelligence: Tencent Games Strategy 2019
they can receive an official release in China. It’s currently unclear when hardware will receive all
approvals and so far, no software has been approved by the gaming regulator. Therefore, we do
not expect to see more news on the Nintendo Switch launch until this happens which we estimate
to be towards the end of 2019 or beginning of 2020.
Whilst Nintendo and Tencent have partnered to distribute the Switch in China, we note that the
partnership may extend to other areas such as Nintendo’s mobile game business. None of
Nintendo’s mobile games have yet to launch in China and we expect Tencent to localise and
publish these titles as well as work with Nintendo to adapt its console IP to mobile devices. Whilst
the console business may remain niche, we would expect a Tencent and Nintendo mobile game
partnership to be much more fruitful for both companies.
Trends to watch in 2019
Investment in Esports
Tencent is already a dominant force in China’s esports industry, operating hit esports titles such as
League of Legends, Honor of Kings and PUBG Mobile. Tencent is building an esports ecosystem in
China with a more than $1 billion investment in game live streaming platforms Douyu and Huya as
well as undisclosed investment in esports tournament operator VSPN. The company is investing in
its own games and introduced the franchise model for the League of Legends Pro League and King
Pro League. At the UP conference on March 24th, Tencent rebranded its Tencent Games Arena
(TGA) esports tournament to Tencnent Esports Games (TEG), with the new tournament covering
30 esports titles across 8 professional esports competitions.
In 2019, Tencent plans to operate more esports event this year at a much larger scale, especially
after the success of Chinese teams in esports tournaments last year. Local governments in China
are seeing the potential in esports and have signed agreements with Tencent to subsidise esports
competitions and boost economic growth. We note that esports is currently seen as a way to
increase engagement and spend within games and the main value being generated is the revenue
from these games. As esports grows and is supported by more stable infrastructure, we would
expect it to become a more material and profitable venture for Tencent.
New technology in games (AR+LBS+Blockchain)
Tencent is constantly investing in R&D to create new ways to play and engage with games. We’ve
started to see new trends emerging such as Augmented Reality, Location Based Services Gameplay
and Blockchain games. In April 2019, Tencent launched its new smartphone game ‘Let’s Hunt
12China Games Market Intelligence: Tencent Games Strategy 2019
Monsters’ to demonstrate how this technology could be implemented into video games. The
game takes the AR+LBS elements from Pokemon Go and combines it with the Blockchain elements
from Cryptokitties to create a social mobile game based on Chinese mythology.
In the game, players can find and capture virtual monsters in the real world and then rear and
trade digital kittens stored on a blockchain. Each kitten is unique and holds real world value as
they can be traded on an official in game market. The core game itself has been received positively
from players and the title is a top 10 grossing game on the iOS games chart in China. Whilst Let’s
Hunt Monsters is no more than a tech demo and proof of concept at this point, it shows what can
be possible in future games.
Growth of Mini Games
Mini games and super casual games are making a comeback thanks to social media apps such as
WeChat and QQ in China. WeChat Mini Games are simple, social and contain a competitive
element to keep players engaged and bring them back day after day. They are perfect for first time
mobile gamers and current mobile gamers who are looking for a simple yet challenging
experience. Tencent launched its WeChat Mini Games platform in December 2017 and games on
the platform have reached more than 400 million players, half of which are female.
Tencent has enabled in game purchases and advertising for third party publishers on the platform
and has now announced that it will be enabling mini games within its QQ Game Centre app which
has 300 million users. Mini games are growing the gaming market by bringing in new gamers and
lapsed gamers with simple, easy to play games. We expect players of WeChat mini games to
migrate over to midcore and hardcore games over the next few years. Whilst Tencent is the leader
in this category, many other tech companies such as Douyin and Tencent backed Kuaishou have
launched their own mini game platforms on mobile.
Cloud Games and 5G
With 5G set to launch in China this October, the possibilities of cloud games have moved from
concept to a finalised product in the form of Tencent Instant Play which is a cloud gaming service.
Cloud gaming will allow games to be streamed from a remote server in the cloud to a user,
removing the need for high spec hardware and allowing any game to run on any device. Tencent
Instant Play promises that games will run in 1080p at 60fps across PC and Mobile devices with a
response time of less than 40ms.
Tencent is currently testing this technology with a closed test for users in Shanghai and
Guangdong. Cloud gaming is an emerging trend in 2019 and will allow the gaming market to grow,
13China Games Market Intelligence: Tencent Games Strategy 2019
reach new gamers, and offer new ways to engage with games. Tencent already has a robust cloud
business in China with 75% of the top mobile games in the country using Tencent Gaming Cloud
already. We believe Tencent is uniquely positioned to become the leader in the cloud gaming
market due to its experience in cloud and gaming, not to mention that it will not have to compete
with other cloud gaming platforms such as Google Stadia due to Google services being banned in
the country.
Outlook for 2019
With more than 20 titles showcased at Tencent’s UP conference, a commitment to esports and
increased investment / M&A in the gaming space, it’s clear that Tencent is continuing to focus on
gaming as a key driver of growth in 2019.
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