Read more: Tencent Plans ‘Valorant’ League as Gaming Crackdown Eases
Tencent’s appetite for foreign gaming assets is increasing at a time when it’s divesting other assets and spending more judiciously at home. In November, the WeChat operator pledged to dole out $20 billion of stock in meal delivery leader Meituan as a special dividend, about a year after similar divestitures of JD.com Inc. and Sea Ltd. However, rising tensions between the US and China — as evidenced by the brewing push to force a ban or the sale of ByteDance Ltd.’s TikTok in the US — could hurt Tencent’s international gaming foray.
What Bloomberg Intelligence Says
China‘s video-games regulator has approved a further 27 imported titles, down from the 44 it approved in December 2022. Tencent and NetEase each had one minor imported title approved in the latest round. This supports our view that China’s video-game giants will in future need to become more self-reliant in generating intellectual property as barriers to foreign gaming companies increase. The news also highlights regulators’ shift toward favoring smaller studios.
— Robert Lea and Tiffany Tam, BI analysts
WeChat’s fledgling short-video feed has been a rare bright spot in Tencent’s portfolio. The company is under pressure to better monetize China’s most ubiquitous app, just as users and marketers flee to rivals like ByteDance. WeChat’s video accounts tripled in views last year, as executives forecast 1 billion yuan of ad sales through the feature in the fourth quarter.
Like its rivals, Tencent implemented unprecedented cost curbs to make it through 2022’s Chinese economic malaise. Tencent’s cloud computing business is reinventing itself to get rid of loss-making contracts and focus on improving margins, and sluggish businesses like some e-commerce and live-streaming have been shut down altogether. In December, billionaire founder Pony Ma delivered a rare rant about complacent employees in a town hall meeting, stressing aggressive cost controls “should become a habit” going forward.
At a time when companies like Microsoft Corp. and Google are rushing to show off their latest artificial intelligence creations, Tencent has said its plans for ChatGPT-style tools are underway. OpenAI’s ChatGPT, now a global phenomenon, has triggered a race among Chinese tech firms to catch up, and Baidu Inc. has already scored positive reviews among selected users.