TENCENT’S2018 GAMESSTRATEGYMay2018Author:DanielAhmad

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ChinaGamesMarketIntelligence:Tencent’s2018GamesStrategy

TENCENT’S2018GAMESSTRATEGYTencentUPConferenceTencenthelditsannualUPconferenceonApril23rd,2018inBeijing.Thesloganfortheconferencewas‘WithloveWecreate’.Thecompanyannouncedastronglineupofgamesfor2017aswellasanumberofnewinitiativesthatTencentplanstoengageinthisyear.Tencentisnowthelargestgamescompanyintheworld,generatingannualrevenuesofRMB118billion($18.7billion)fromitsgamesacrossPC,Mobileanddistributionplatforms. Tencent’svisionforgamesthisyearisto‘exploremorepossibilities’forgamesbycreatingmoreengaginggamesacrossavarietyofgenresandplatforms.Attheevent,Tencentannounced26brandnewgamesacrossmultiplegenressuchasRPG,Action,Simulation,Card,ACG,AR+LBS,Sandbox,seriousgamesandbattleroyale. PanEntertainment Tencentiscontinuingtofocusonitspanentertainmentstrategywithco-operationacrossitsdigitalbusinesses–TencentPictures,TencentAnimation,TencentLiterature,TencentEsportsandTencentGames. TencentPicturesannounced15brandnewfilmandtelevisionworksincludingnewTVshowsforHonorofKingsandJXOnline3.TencentAnimationannouncedanumberofinitiativeswhichincludecreatinganesportsanime,releasingaseriesofcomicsbasedonHonorofKingsandworkingwithTencentGamestocreatemobilegamesfor‘FoxSpiritMatchmaker’and‘Underoneperson’. TencentLiteratureismaximisingthevalueofitsIPbycollaboratingwithTencentGames,TencentPicturesandTencentAnimationtoutilizeItsIPacrossmanydifferentsegments.TencentEsportswillcontinuetoexploretheesportsbusinessmodel,fostertalentandpromotethedevelopmentoftheindustry.ThesegmentisalsoplanningtobuildupontheinternationalinfluenceofChineseesportstoreachmoreplayerswithitsHonorofKingsworldcup.

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ChinaGamesMarketIntelligence:Tencent’s2018GamesStrategy

TwoothergamesthatTencentareworkingonareLordXueYingandDouPoCangQiong.LordXueYingisanMMORPGfantasygamethatisbasedonapopularnovel.TencentwillcollaboratewithinternallytocreateananimationandotherentertainmentbasedontheIP.DouPoCangQiongisalsoanMMORPGdevelopedbyTencent’sTimistudioandbasedonapopularnovel.TheIPwillalsohaveitsownTVshowandanimationtobroadenthescopeoftheIPandtocarryoutTencent’spanentertainmentstrategy. BattleRoyaleBattleRoyalehasbeenahottrendinChinasincePUBGlaunchedonSteaminthefirsthalfof2017.TencentwasquicktojumponthetrendandlostnotimeinnegotiatingadealtobringPUBGtoChina.ThefinalagreementincludedthatTencentpurchasea5%stakeinBluehole,gaintherightstothePCversionandalicensetodeveloptwomobileversionsofthegame.ThetwomobilegameswerepublishedinJanuary2018inChinaandlaunchedintherestoftheworldlastmonth.ThePCversionofthegameisstillindevelopmentandwillreleaselaterthisyear.InadditiontoPUBG,TencenthasalsosecuredtherightstopublishthebattleroyalemodeforH1Z1inChina.TencenthasalsodevelopedbattleroyalemodesforCrossFireMobileandCallofDutyOnline.GloriousMissionisastandalonebattleroyalegamedevelopedformobiledevicesandEuropaisastandalonebattleroyalegameforPC.TencentisworkingwithGarenatotestEuropainSoutheastAsiabeforeofficiallyreleasingthegame.It’sclearthatTencentisworkingtodominatethegenre. AttheUPconference,TencentannouncedthatitwouldalsopublishFortniteinChinaduetoitsrelationshipwithEpicGames.Thecompanyhasa48%stakeinEpicandwillworkwiththecompanytolocalisethegame,offeringamecontentandcreateananti-cheatexperience.TencentisinvestingRMB100million($15.8million)intothegame.Halfofthemoneywillbeusedtocreatenewcontentforthegamewhilsttheotherhalfwillbeusedtodevelopanesportssceneforthegame.Fortnitenowhas45millionplayersworldwide.

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ChinaGamesMarketIntelligence:Tencent’s2018GamesStrategy

Blockchain,AR&LBSTencentiscontinuallyexploringnewtechnologytocreatenewtypesofgames.Onesuchtrendthathasbeengainingsteamrecentlyistheconceptofblockchaingames.Blockchaingamesaregamesthathavedigitalitemsthathavethepotentialtoappreciateanddepreciateinvaluelikecryptocurrencies.CryptoKittiesisanexampleofasuccessfulblockchaingameswhereuserscanbuydigitalcatsontheblockchain,breedthemwithothercatstocreatenewcatswithuniqueattributes,thentradethematahighervalue.Tencent,NetEase,BaiduandXiaomiarejustsomeoftheChinesecompaniesthathavereleasedblockchaingames. Tencent’sbrandnewblockchaingameiscalled‘Let’sHuntMonsters’.ThegameisessentiallyacrossbetweenPokemonGoandCryptoKittiesasitallowsuserstocapturevirtualmonstersintherealworldusingaugmentedrealityandlocation-basedservices.Playerscanthentrade,exchangeandbreedthesemonstersthatarestoredontheblockchain.TencenthasconfirmedthatthegamewilllaunchinMayandupto110billiondigitalmonsterscanbestoredontheblockchain. Tencentalsoannouncedanothergamecalled‘WangPaiZhuoYaoShi’thatwillutilizeAR+LBS.Thegame,whichisdevelopedbyTencent’sLightspeed&QuantumStudio,isapetcatchingandcollectiongamethatissimilartoPokemonGo.Oncecaptured,thepetscanbefedfood,trainedincombat,givenbetterclothingandmore.Trainedpetscanfightenemybossesandengageinothervarioustasks.Thegamewillevenhaveapetmatchingmodethatallowsuserstopairtheirpetswiththoseoftheirfriendstocreatenewfriendshipsandincreasestats. NextGenerationSandboxTencentannouncedthreenewsandboxgamesattheUPconferencethisyear.ThecompanynotedthatsandboxgameshavebeenextremelypopularsincethelaunchofMinecraftin2009andthatthesetypesofgamesopenupentirelynewpossibilitiesforgamers.TencentisworkingwithFreejamgamestobringRobocrafttoChina.Thegame,whichhasalreadysoldover14millionunitsonSteam,isa‘build,driveandfight’sandboxgamewhereusersbuildrobotsandthenengageinonlinebattles.

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ChinaGamesMarketIntelligence:Tencent’s2018GamesStrategy

TencentisalsoworkingwithBohemiaInteractive,thedevelopersofDayZ,tobringanewsandboxgametoChinacalledYlands.YlandsisasandboxexplorationadventuregamethatissimilartoMinecraft.Playerscancreatetheirowncharacters,chooseanenvironmentandstarttheirownadventure.Thegameevenhasanin-gameeditorthatallowsuserstocreatecustomscenariosandenvironments.ThegameissettolaunchonWeGameinJune2018. Inadditiontoworkingwithoverseasdevelopers,Tencentisdevelopingitsownsandboxgamecalled‘ShouGongXingQiu’.Thegamewillallowplayerstodropintoanopenworldwheretheycanmineformaterials,maketools,buildhousesandcraftotheritems.ThegameinessenceisextremelysimilartoMinecraftinbothgraphicalstyleandgameplayelements.Therewillalsobemodsupport,anin-gameeditorandafocusoneducationalfeatures.ThegameisbeingdevelopedtorunacrossPC,TabletsandMobileonacloudserverthatstoresalldata.Thegameissettogointobetainthethirdquarterof2018. Sportsgames TencentisaleaderinthesportsgenreasitholdstherightstopopulargamessuchasNBA2KOnlineandFIFAOnline.Thecompanyplanstostrengthenitsholdonthesportsgenrebyexpandingtomultipleplatformsandlaunchingupdatedversionsofcurrentgames. NBA2KOnline2isthesequeltotheoriginalgamewhichcurrentlyhasover35millionregisteredusersinChina.NBA2KOnline2isdevelopedbyTencentand2KGames,itwillincludeabrand-newengine,advancedphysicsandnewinnovativegameplaymethods.Thegame,whichiscurrentlyinbetaonPC,willalsohaveaprofessionalesportsleaguelaunchlaterthisyear. TencentisalsoworkingwithNexonandEAtolaunchFIFAOnline4forPCinChinalaterthisyear.Thegamewillhaveimprovedgraphics,amoreaggressiveAIandnewgameplaymechanicssuchasanin-gamecardsystem.Inadditiontothebrand-newPCgames,Tencentisworkingwithboth2KgamesandEAtobringthegamestomobiledevices.NBA2KOnlineandFIFASoccerWorldwillcometosmartphoneswithrealtimePVPgameplaylaterthisyear.

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ChinaGamesMarketIntelligence:Tencent’s2018GamesStrategy

SeriousGamesEarlierthisyearTencentannouncedthatitwaslookingtoextendbeyondtraditionalvideogamesbylaunchinganumberof‘seriousgames’withtheprimarypurposeofsolvingrealworldissues.Tencentplanstoreleasesimilargamesacrossfiveuniquecategories:TraditionalCulture,EducationalKnowledge,ScienceandEngineering,PopularScienceandParent-ChildInteraction.Whilstthesegameswillhelpotherssolverealworldissues,Tencentwillalsobeabletousethedatatoimproveandgrowitsbusiness.TencenthasalreadylaunchedanumberofseriousgamesandattheUPconferencethecompanyannounced4moregamesthatcovereducation,popularscience,traditionalcultureandscienceandengineering.Epistory,whichiscurrentlyavailableonWeGame,isanRPGgamethatallowsuserstoperformactionsbytyping.KerbalSpaceProgramisaspacesimulationgamethatallowsuserstolearnaboutspacetravel.TumorDoctorisamedicalsimulationgameandTaleofNisanisagamethatteachersplayersabouttraditionalChineseculture. WeChatMiniGamesWeChatMiniGameshasbecomeahottopicinChinaafterreachingmorethan400millionusersinjustafewmonths.MiniGamesaresmallapplicationsthatrunwithinWeChatanddonotneedtobedownloadedinordertoplay.Thesegamesareusuallysimpletoplayandcontainacompetitiveelementinordertoattractcasualgamersandnon-gamerswhouseWeChatonadailybasisbutdonotdownloadgamesfromappstoresregularly. Oneofthemostpopularlaunchgamesiscalled‘JumpJump’.Thisgame,whichhasplayersjumpingfromoneblocktothenext,hasaccumulatedmorethan100milliondailyactiveusersduetotheaddictivenatureofthegameaswellasthestrongcompetitiveelementwhichisamplifiedbysocialfeaturesandleaderboards. OnApril21st,TencentheldaWeChatMiniGamesesportseventthatinvitedthetop30playersat‘JumpJump’. Thecompetitiveeventsawall30playerscompeteintryingtogetahighscore.Fiveplayerswereabletoplaythegameformorethan120minutesandintheendthetopplayerwasawardedprizemoneyofRMB100,000.WhilstMiniGamestraditionallydon’tfitintothedefinitionofanesportsgame,it’sclearthatTencentisaimingtoengagecasualgamersthrough

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ChinaGamesMarketIntelligence:Tencent’s2018GamesStrategy

thiseventandbuildaWeChatgamingecosystem.AccordingtoTencentaroundhalfofWeChatMiniGameplayersarefemaleandaround40%arenotactivemobilegamers. PCtoMobileGameadaptationsTencentrecentlyinvestedRMB3billion($474million)inShandaGames.ShandanotedthatthisinvestmentwillhelpthembolstertheircoregamingbusinessandleadtofuturecollaborationswithTencent.Shanda,whichwasoncetheleadinggamescompanyinChina,isknownforitspopulargamestitlessuchasDragonNestandTheWorldofLegend.TencentrecentlypublishedamobileversionofDragonNestin2017andthisweekannouncedthattheywillalsopublishTheWorldofLegend3Dformobile.BothgameswereoriginallyreleasedforPCandarenowbeingadaptedtomobiledevices. TencentisalsoworkingwithPerfectWorldtobringsomeofitsoldergamestomobile.Thegame‘PerfectWorld’,whichlaunchedonPCin2005,willbecomingtosmartphoneslaterthisyearwithTencentasthedistributor.PerfectWorldisworkingwithTencenttoutiliseitsstrongdistributionchannel,sothegamecanfindsuccess.ThegameissettolaunchlaterthisyearandwillincludeupdatedgraphicsandPVPgameplay. Inadditiontoworkingwithpartners,TencentisalsoadaptingmanyofitsolderPCtitlestomobileinordertobreathenewlifeintotheIP.SinceDecember,TencenthaslaunchedQQSpeed,QQDanceandQQHuaxiaformobiledeviceswithhugesuccess.LaterthisyearthecompanyplanstolaunchQQFreeFantasy,adaptedfromthegameofthesamenamethatreleasedonPCin2007.TencenthasdemonstratedthatitcancreateanoriginalgameIP,operateitsuccessfullyonPC,thenextenditssuccesstomobile. OthergamesTencenthasacquiredthelicensetoRedAlert,therealtimestrategygamethatwasoriginallyreleasedin1996.Tencentisdevelopingabrand-newgamecalledRedAlertOnlinewhichwillhaverealtimestrategyandsimulationelements,newandimprovedgraphics,andarichsocialexperiencethatissettoreleaseinJuly.

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ChinaGamesMarketIntelligence:Tencent’s2018GamesStrategy

TencentwillalsolocaliseanddistributeMagictheGatheringArenaforPCinChina.ThecompanyplanstobreakintothePCtradingcardgamemarketthroughthistitleandothersinthefranchiseinordertocompetewiththelikesofNetEaseandGaeawhodistributeHearthstoneandGwent:TheWitcherCardGameinChina.Tencentisevenplanningtocreateanesportstournamentforthegame. InanefforttogrowitspositionintheACG(Anime,Comics,Games)segment,TencentisworkingwithNamcoBandaitobringNarutoOnlinetomobiledevices.Themobilegamewillbebasedoffthebrowsergamewhichhas60millionregisteredusersinChinaandholdsthetitleoftheworld’smostpopularwebgame. Tencentinvestment/M&AdataAccordingtodatafromdigi-capital,TencentledthewayingamesrelatedinvestmentsandM&Aactivityoverthepast12months.Atotalof$22billionwasspentongamesrelateddealsoverthepast12monthswithTencentaccountingformorethan40%.Thetopdealsincludedinvestmentsof$632millionand$462millioningamelivestreamingcompaniesDouyuandHuya.Thepublisheralsoinvested$476millionintoShandaGames,$130millionintoKakaogamesand$72millionintoOurpalm. Whilstthesedealsareofhighvalue,TencentdidnothaveahugeM&AdeallikeitdidwithSupercellin2016orRiotGamesin2011.SpeakingattheGamesBeatSummitonthe10thofApril,theheadofTencentbusinessdevelopmentinNorthAmericaexplained,““Acoupleofyearsago,ourdealswerethebigonesthatyou’veheardof.Butoverthelast12months,we’vestarteddoingsmallerinvestments—around$3million—atanearlierstage.”Tencentisastrongpartnerduetoitsexperienceinvideogamedevelopmentandpublishing.ThecompanyhasalonghistoryofworkingwithbothdomesticandoverseaspartnersandalsohasahugesocialnetworkpresencewithWeChatandQQthatallowsittoexcelingamesdistribution.Tencent’sstrategyincludesinvestmentsingamingcompaniesthataugmentitsexistinggamesandpipeline,pickingupontrendsforgrowthareasglobally.TencentisabletoutiliseitspartnersexpertisewhenlaunchingitsowngamesaswellasprovideitsownexpertisewhenlaunchingitspartnersgamesinChina.

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ChinaGamesMarketIntelligence:Tencent’s2018GamesStrategy

SummaryWith26brandnewgames,it’sclearthatTencentisheavilyfocusingonitsgamingbusinessasahugegrowthdriverfor2018.TencentiscontinuingtoreleasegamesinmainstreamcategoriessuchasMMORPG,Action,ShooterandStrategytostrengthenitsholdinthesemarketswhilstexpandingtonewcategoriessuchasACGgames,Blockchaingames,AR+LBSgames,sandboxgames,seriousgamesandbattleroyalegames.Thecompanycontinuestocollaborateacrossitsbusinesssegmentstoexpanditspanentertainmentandmulti-screenstrategy. Inadditiontoitsfocusonthedomesticmarket,thecompanyismakinganumberofmovestobringitsself-developedgamestotheglobalmarket.TencenthasbeenabletoincreaseitsgamesdistributionstrengththroughWeGameonPCandMyApp,WeChatMiniGamesandQQonmobile.Inadditiontoself-developingtitles,TencentcontinuestolicensetitlesaswellasfundnewtitlesthroughitsAuroraproject. Tencentissettoremainthelargestgamescompanyintheworldandweexpecttoseestronggrowthin2018andbeyond.