- Tencent Holding Ltd TCEHY is ramping up overseas investment in gaming assets, despite the ease of regulatory restrictions.
- Tencent aims to invest in or purchase gaming studios after slowing the pace of new investments towards the end of 2022, Financial Times cites familiar sources.
- European gaming studios are Tencent's primary target.
- Beijing resumed approving new game titles in April 2022 after a nine-month blockage amid a broader crackdown on gaming that hampered the growth of Tencent and rival NetEase, Inc NTES.
- Tencent has a profitable portfolio of popular games on the mainland. It accounted for 44% of online gaming revenue in China in the first half of 2022, according to Chyxx.
- However, Tencent is concerned about Beijing preventing its domestic business from becoming as dominant as before. It needs to move fast overseas at a time when rivals like Saudi Arabia's sovereign wealth fund are rapidly expanding into the global gaming industry.
- Tencent's domestic gaming business made up 73% of its gaming revenue in 2022 and looks to launch several blockbuster titles online in 2023. Still, domestic regulatory concerns triggered concerns for the company.
- Before 2020, Tencent's gaming investments were heavily slanted toward Chinese companies. Now it's getting to the point where most investments are overseas, said Daniel Ahmad, gaming analyst at Niko Partners.
- Company insiders fear Tencent's growing overseas focus could provoke regulatory scrutiny, with government officials pressuring companies to focus on bolstering the domestic economy.
- Despite Tencent's robust pipeline of games this year, the reduced investment following Beijing's crackdown deprived it of a clear group of future "cash cow" blockbuster hits, a problem the company is addressing by investing in or acquiring smaller studios overseas.
- With China's escalating geopolitical tensions with the U.S., Europe remains the only alternative for Tencent.
- Price Action: TCEHY shares closed lower by 1.63% at $43.38 on Tuesday.
- Photo by Chris Yunker via Flickr
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Posted In:
Benzinga simplifies the market for smarter investing
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
Join Now: Free!
Already a member?Sign in
