Tencent is coming - China wants to play

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Published on: 14/08/2018

For the longest time, China was jokingly known for its cheap and low-quality knock-offs. ‘Made in China’ was all but synonymous with cheaply manufactured stuff created by labourers working in slave conditions – but China has managed to turn things around.

Though many companies still choose to manufacture there or in Taiwan because it’s cheap, China’s image has gotten a major make-over. In the esports sector, this is pretty much all because of one company – Tencent.

The tech giant is already the largest video game company by revenue and it’s not about to stop. Based in Shenzhen, the company is making investments at every level of the esports business: importing game titles to China and localising them, hosting competitions on Chinese ground and buying streaming services to broadcast it all.

tencent-tech-giant-making-the-largest-video-game-revenue

Source: Newzoo

Despite this, Tencent is still best-known for its WeChat app – a social-media messaging app that is dominating China’s $38 billion games market. Despite these staggering numbers, Tencent is still pretty inefficient in its investments – though some of their better acquisitions are impressive.

Tencent is the company that brought RocketLeague to China for example. It’s working too: Esports are now more popular in China than ever before. In fact, the Chinese esports market is forecast to double to $1.5 billion by 2020 – according to a Tencent report earlier this year. Other experts agree though, that China is headed for bigger things, they just can’t quite agree on when the country will reach the billion $ mark.

One of the struggles Tencent is still dealing with is monetization: With profits in the high millions, this may not seem like an issue, but it can be. To advertisers, the average US esports fan that watches streams a few times per month is worth about $14.80, based on ad revenue and a few other sectors. In China, this same fan is only worth about $2.70, because the monetization simply isn’t there yet.

Despite this, these $2.70 still add to phenomenal numbers when multiplied with the number of people that watch. A League of Legends event in May achieved a peak audience of 127.6 million online viewers. That makes it one of the most popular sporting events in history – and not just esports. The 2018 NFL Super Bowl ‘only’ registered 103 million viewers at peak.

Now, Tencent obviously dominates the Chinese esports field, but it isn’t shy about expanding outwards either. Subsidiaries without Tencent branding are popping up in what experts have called ‘Tencent’s silent expansion’. This is nothing to be afraid of though – it is however, a pretty clever move by the company. It’s working too – in June, the company demoed the game Arena of Valor at a convention in LA.

Last year in China, that game generated almost $2 billion in revenue – since its launch in December, the game has generated $3 million in the US alone. It’s a good start but there’s definitely more to come – Tencent isn’t done yet!

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Author
Melanie H. - "MelanieH" | Esports writer and gamer

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