Chinese video game companies have been chased at home, welcomed in Europe

Tencent, the world's largest gaming company by revenue, has purchased studios across Europe

Tencent, the world’s largest gaming company by revenue, has purchased studios across Europe.

China is investing billions in the video game industry in Europe, but analysts have warned there could be problems along the way unless regulators start taking stricter notice.

Europe is embroiled in long-running disputes with Beijing over trade, the environment, and education. Raw materialsAnd intellectual property — but video games so far aren’t part of the battle.

With Beijing’s emphasis on video game industry At home, China’s tech giants are looking to make investments abroad – raising concerns ranging from data security To limit creative freedom.

“Europe has the idea that we will be able to separate strategic industries from non-strategic industries,” Antonia Hamidi of the Mercator Research Institute told AFP.

“Video games for most policymakers will always go to the unstrategic heap.”

This helped Tencent, the world’s largest gaming company by revenue, buy into studios across Europe – including the then-world-record $8.6 billion deal for Finnish Supercell in 2016.

Chinese rival NetEase made its biggest foray into foreign game studios in August, acquiring France’s Quantic Dream — just days before Tencent increased its stake in Ubisoft, another French studio.

EU regulators only consider major investments with a European dimension, and national regulators have shown no interest.

When Tencent bought British studio Sumo for $1.3 billion last year, the deal was scrutinized not by UK regulators but by their US counterparts.

China “cold”

Analysts say Chinese companies are increasingly seeking profits abroad due to stifling restrictions in their home markets.

Tencent posted its first quarterly loss in August on the back of a widespread crackdown on the technology sector.

The Chinese government has identified video games as a potential threat not only to the power of the state but also to the well-being of citizens.

Beijing imposed a nine-month ban on approval of new video games last year and now only approves a fraction of the number it previously allowed on the market.

Game makers had to clean up “politically harmful” content, and the state severely restricted the time youngsters could spend playing.

“Chinese companies in general are looking further afield given the local market climate,” said Louise Schurthos of Ampere Analysis.

The Chinese government has also imposed strict limits on the time young people spend playing

The Chinese government has also imposed severe restrictions on the time young people spend playing.

Several reports have indicated that Tencent is preparing to ramp up its overseas investment and could even start taking over smaller companies.

Kevin Shimota, the company’s former chief marketing officer and author of “The First Superapp,” said Tencent “is getting in on a lot of money.”

“The Chinese market is cold at the moment, so in terms of Tencent’s global strategy expect it to be more aggressive,” he said.

But he stressed that the goal is unlikely to be direct acquisitions or deeper control of foreign companies, and perhaps even Tencent is looking at ways to develop games for audiences outside China.

“more weird”

Pervasive in China, Tencent is an empire of gaming, social media, and payment services largely driven by the WeChat app, which has over a billion monthly users.

Its leader, Bonnie Ma, has worked hard to keep himself out of the spotlight – and away from Beijing’s firing line.

The company is intent on presenting a humble face to the world.

“Whether we are a minority investor or a majority shareholder, we do not exercise creative, editorial, managerial or day-to-day control,” Tencent told AFP in a statement.

Tencent’s business model has generally been to buy from foreign companies and publish their games to the Chinese market.

Since those foreign companies were unlikely to find any other way to enter China, they welcomed new investment and revenue streams.

NetEase follows the same model.

A blog from Quantic Dream announcing the acquisition stressed that the French company would retain control of “the editorial line, artistic direction of our projects and studio management.”

NetEase did not respond to an AFP request for comment.

Analyst Hamidi said the laissez-faire approach worked well when business was booming – but the effects of an economic downturn or political upheaval were impossible to predict.

She suggested that European regulators could benefit from a broader approach to asking whether one country – China or any other – should be allowed to control an entire industry.

“Having a sector dependent on China in general is a bad thing at the moment,” she said.

Tencent buys a stake in the Japanese game company behind Elden Ring

© 2022 AFP

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