Tencent ventures overseas to offset slowing growth at home

More than a month after Tencent's Vice PresidentXia Lin stated that vast opportunities 'lay outside mainland China'during the developer conference, the gaming giant has amped up its plans of venturing overseas.

According to a Reuters report, Tencentis still looking to set anchor on foreign shoresbut instead of completely relying on the 'Mergers & Acquisitions' (M&A) approach where it acquired minority stakes and stayed invested as a passive financial investor, the company will buy majority stakes in overseas gaming firms.

"In terms of the game business, our strategy is ... to focus on developing our capabilities, especially in the international market.We will continue to be very active in terms of acquiring new game studios outside China," saidTencent's Chief Strategy Officer James Mitchell.

The aggressive approach by the Shenzhen-based company comes in the backdrop of the Xi Jinping government in China imposing draconian crackdown measures on the industry.

Moreover, the move has been exacerbated by the fact that Tencent, in August,posted its first drop in quarterly revenue since going public.Revenue in the second quarter fell three per cent to $19.8 billion compared to the year before, while profits plunged by 56 per cent to $2.6 billion.

The crackdown on the gaming industry in China

Describingvideo games as ‘spiritual opium’ for the masses, Xi started a purge process last year where major gaming giants were pushed to the fringes with Tencent being one of the victims.

Reportedly, under the restrictions, anyone under 18 years old can only play video games three hours a week, or one hour per day at 8 PM on Fridays through Sundays, that is, the weeknights. The restrictions came into force in September 2021 and since then, they have remained in effect.

According to the Game Publishing Committee of the China Audio-Video and Digital Publishing Association, the total number of gamers in China fell for the first time since 2015 to 665.69 million from 665.57 million. Meanwhile, the industry’s revenue dropped 1.8 per cent to $21.9 billion in the first six months of the year, compared to the same period last year.

(With inputs from agencies)

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