Chinese gaming giant Tencent is set to further accelerate its investments in Europe, getting ahead of potential future legislative restrictions.
According to reporting from the Financial Times and those familiar with the matter, after the lifting of restrictions Tencent is set to further its investments abroad. This is to get ahead of potential future legislative restrictions as it claws back former dominance in the gaming market domestically. According to sources cited by the Financial Times, Europe will be the main target of these investments, as the company faces issues in the US.
This will mark a major change from the previous year. The Financial Times cites one source as saying, “We weren’t aggressive in our capital deployment towards the end of last year given macroeconomic uncertainty in Europe and the political situation with the US.”
It seems now that things are changing, with a move to further M&A as Tencent seeks to compete with major groups such as Savvy, who recently dropped massive cash to acquire mobile game developer Scopely. A 10% drop in sales for major mobile titles Honor of Kings and Peacekeeper Elite is also noted as two sources of concern for Tencent and their future revenue streams if they do not diversify.
Moving away from China
Tencent’s move is significant because it not only indicates shaken confidence domestically by Chinese game companies, but also that there is significant interest in splashing their cash overseas. Given that companies like Tencent and NetEase are still relatively prosperous, we could very well see a major spree of spending and acquisitions in the coming months and the rest of 2023.
Europe itself boasts major studios and we’ve already seen major acquisitions such as Sega purchasing Rovio. As an alternative to investing further in the US, Europe is a good choice and Tencent is likely to find many mobile studios welcoming their cash.
Furthermore, this would follow a similar trend predicted by Drake Star, who cited their research and concluded that the second half of 2023 would see a major uptick in M&A. Diversifying their revenue stream could only be beneficial for Tencent to preempt any further legislative issues at home, and we’ve already seen them do so with titles such as Street Fighter: Duel and Honor of Kings which were previously only available in China slowly making their way West.