Tencent sharpens focus on 'evergreen' video games in mainland China as domestic industry matures

Tencent Holdings is looking to sharpen its focus on "evergreen" video games that generate steady revenue, instead of rushing out new titles, as the domestic market continues to mature.

"We are more focused now, and we tend to cancel many products with intermediate positioning," Tencent senior vice-president Steven Ma Xiaoyi said in a report published on Tuesday by Chinese digital news outlet Youxiputao. "For those projects that will never have the opportunity to challenge the first or second place in their own genre ... it is better not to do them."

Ma said this strategy takes into account the broad transformation in mainland China's video gaming market, which is maturing.

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The shift in focus for Tencent, which operates the world's largest video gaming business by revenue, shows how the Shenzhen-based internet giant is adapting to the domestic gaming market, which experienced slower growth owing to the country's uneven post-pandemic economic recovery that affected consumption, and regulatory scrutiny.

Tencent Holdings senior vice-president Steven Ma Xiaoyi. Photo: Tencent alt=Tencent Holdings senior vice-president Steven Ma Xiaoyi. Photo: Tencent>

That slow growth was reflected in Tencent's latest financial results, which saw its domestic video gaming business post a 2 per cent year-on-year drop in the first quarter to 34.5 billion yuan (US$4.8 billion). By contrast, overseas revenue for this business rose 3 per cent to 13.6 billion yuan in the same period.

In 2023, mainland video game sales increased 14 per cent year on year to 303 billion yuan, according to data from the Game Publishing Committee of the China Audio-Video and Digital Publishing Association. That was in stark contrast 10 years ago, when the industry saw a nearly 40 per cent annual growth amid the rapid expansion of mobile internet users in the country.

Tencent's acquisition strategy in the video gaming sector has also changed as a result, according to Ma, who is also responsible for video game publishing unit Tencent Games' international distribution.

"In 2007, when China was still an emerging market ... everyone paid more attention to the short term, and the companies we invested in basically achieved [good] results within two or three years," Ma said. "Today, we've extended the timeline, and I am very open to plans which last five to 10 years."

A screenshot of Tencent Holdings' new hit video game Dungeon & Fighter Mobile. Photo: Handout alt=A screenshot of Tencent Holdings' new hit video game Dungeon & Fighter Mobile. Photo: Handout>

"When the industry pays more attention to long-term opportunities, you need to have faith, believe in it, love it and persist with it for a long time to reap the fruits," he said. "This can discourage some [industry players], but the benefit here is that we can see who really has faith over the long term."

DnF Mobile has already achieved US$9.86 million in weekly revenue to rank as the No 3 top-selling game on the China App Store, behind Honour of Kings and Peacekeeper Elite with revenue of US$12.96 million and US$12.15 million, respectively, according to Qimai's estimates.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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