The largest gaming company in the world is Tencent. The Chinese conglomerate is behind huge games like League of Legends, PUBG Mobile, or the mobile series “Clash of Clans.” With impressive business figures for 2021, it outshines Sony, Microsoft, and Nintendo once again. 2021 was a “weak” year, as the Chinese party is causing trouble.
Who are the largest gaming companies in the world? Analyst Daniel Ahmad has compiled the revenues of the largest gaming companies in the world (via twitter):
- Nintendo with $15.3 billion
- Microsoft with $16.28 billion
- Sony with $24.87 billion
- Tencent with $32.3 billion
While we in Germany are well aware that Microsoft is buying Activision Blizzard and that Sony is acquiring Destiny developer Bungie, we rarely consider what Tencent is actually up to.
They face very different problems than Western studios. The Chinese tech giant is constantly under the strict scrutiny of the Chinese Communist Party and resorts to – from our perspective – absurd measures to keep the political elite satisfied.
The Netflix series Arcane was a huge hit for LoL – and thus also for Tencent:
Tencent increases revenue by 9.9% – has a “weak year”
What is so special about Tencent’s figures? Tencent increased its revenue in 2021 by 9.9% compared to the previous year.
However, this is a setback for Tencent: It was the lowest growth for the company since going public in 2004.
In a statement to CNBC it states, to explain the “weak growth”:
“2021 was a challenging year during which we welcomed changes and took various measures to strengthen the long-term sustainability of the company, which had a slowing effect on our revenue growth.”
“Gaming as mental opium” raised alarm bells
What do they mean by that? What Tencent actually wants to say with flowery words: In 2021, the Communist Party of China had all tech companies in its sights, especially gaming. Therefore, it was difficult to grow as one usually would.
The political elite in China is reportedly concerned about the health of children, as they supposedly play too much and damage their eyes. Hence, they made it quite clear to companies like Tencent that they must find ways to limit gaming for teenagers; otherwise, they would face harsh consequences. They even called gaming “mental opium”.
Tencent subsequently developed a facial recognition technology and severely limited the gaming time for children and teenagers.
Moreover, in recent months, China has implemented a “crackdown on tech” – tightening controls and regulations significantly. China suddenly expected its tech companies to engage more in the “well-being of the people”: Companies like Tencent and Alibaba suddenly donated 6.5 and 13 billion euros (via dw.com).
Tencent is a giant in mobile games and microtransactions
How does Tencent make so much money? Tencent primarily earns its money from “Free2Play” games, where microtransactions are offered. Growth primarily came from titles like PUBG Mobile, Brawl Stars and Clash of Clans.
They also highlight their “international investments.” Tencent is known for buying into Western studios – even in Germany. Currently, a quarter of their revenue comes from “overseas” – a figure they aim to increase to 50%.
They also praise League of Legends and the Netflix series Arcane.
Investments in new companies in the West are viewed positively, as they are “emerging studios with a promising future”
For 2022 and 2023, they believe they are well positioned, with games like the “LoL Fighting Game”, a brand around Path of Exile, or the German “Cycle Frontier.”
Tencent continues to grow and is also expanding away from China
What’s behind that: Tencent is balancing on a tightrope in China. They are economically highly successful but have to be careful not to provoke the party’s wrath. As soon as the party coughs and views gaming in any way as “harmful to the future of the Chinese people,” all alarms go off at Tencent.
The party has frozen the launch of new games for months. The situation is highly critical. Tencent responds by developing systems that, to us in the West, sound like “surveillance state” and “Big Brother”.
Interestingly, Tencent seems to be strategically using the immense amounts of money they earn from mobile games in Asia to invest in emerging companies in the West. Thus, they are somewhat becoming independent of China.
Tencent is indeed a trailblazer in gaming with Riot Games: In e-sports and also in collaborations with other media, like with Netflix through the series Arcane, the studio is leading in this regard.
