Tencent Chases European Gaming Studios In Quest For Growth After Domestic Regulators, US Disappoint

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

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