Written by Josh Yeh
HONG KONG (Reuters) – A big change is coming at China’s Tencent, with easy-to-play games featuring cute characters taking on obstacle courses ahead of big-budget, sophisticated overseas smartphone franchises. Ta.
Sources say the world’s largest video game company has redeployed hundreds of people since late last year from the development team for the mobile version of “Assassin’s Creed Jade,” a multi-year project with France’s Ubisoft.
They are currently working on the recently launched ‘DreamStar’. This is Tencent’s answer to rival NetEase’s hit Eggy Party, and the company’s best yet in the so-called party game genre, offering simple gameplay, mini-games, and encouraging players to hang out. This is an attempt that has attracted attention. Go out and chat.
As a result, Assassin’s Creed Jade, an action-adventure game set in ancient China that has been in development for mobile for at least four years, will likely be released in 2025 rather than this year, three people familiar with the matter said. revealed. Case. They were not allowed to speak to the media and refused to identify themselves.
The reallocation of resources highlights a trend that is forcing Tencent to make a strategic shift. First, the development of well-known mobile phone series in Europe and the United States tends to be less profitable.
At the same time, rival companies are scoring big hits with ostensibly niche products that offer new angles to gaming, such as NetEase’s Eggy Party and miHoYo’s anime-style fantasy game Genshin Impact. Additionally, the game was developed in-house, so all profits go to them.
Tencent has had great success over the years by developing global hits such as Activision Blizzard’s shooter game Call of Duty and South Korea’s Krafton’s battle royale game PUBG for smartphones.
However, these franchise games (called IP (intellectual property) games) are expensive to produce. Royalty fees of 15% to 20% of sales are typical, and while Apple’s App Store takes a 30% cut, marketing and user acquisition costs could cost an additional 30% to 40%, according to people familiar with the matter. .
After a series of setbacks in the IP game, Tencent plans to become more selective.
“We’re reducing our focus on bigger budget games. Typically we’re looking at games that iterate successful IPs, or proven gameplay successes within a niche, and bring them to market. It becomes a more mass market,” Tencent Chief Strategy Officer James Mitchell said on an earnings call Wednesday.
Tencent is currently seeking to reduce royalty fees to less than 10% of sales in some negotiations, according to people with direct knowledge of the matter.
“Just a few years ago, that was almost unthinkable. Tencent used to be more generous,” the person said.
Tencent declined to comment on the details of the strategic shift.
Setbacks and bamboo shoots
On Wednesday, Tencent reported a slight decline in game sales in the fourth quarter, and also expects overall game sales to be weaker this quarter compared to the same period last year, when game sales surged as pandemic restrictions were lifted. I warned you.
Tencent founder and CEO Pony Ma said the company’s video game division, which had sales of 180 billion yuan ($25 billion) last year, or about 30% of overall revenue, needs to improve. He frankly said that there was.
Another person with direct knowledge of the event said he told a stadium of employees in Shenzhen during the company’s annual general meeting in January that competitors continue to develop new products and that “we have achieved nothing.” It makes me feel like I can’t do it,” he said.
In the same month, Tencent also launched the “Spring Bamboo Shoot Project” aimed at cultivating its own games with innovative gameplay, providing a budget of up to 300 million yuan ($42 million) per game.
Although this is far less than the 1 billion yuan budget of the major series, the effort shows Tencent is willing to take more risks with unconventional game design, the people said.
Several major setbacks only increased the sense of urgency for change.
Last year, Electronic Arts halted development of the Tencent-developed game Apex Legends Mobile, with U.S. company executives saying the quality was not up to expectations.
In December, Tencent halted development of a mobile game based on Japan’s Square Enix’s NieR series. One reason for this is that the Chinese company has struggled to find an attractive monetization model given the high development costs and franchise rights, sources said.
“Mobile game studios have learned that IP is not the silver bullet for user acquisition that it once was,” said Serkan Toto, founder of gaming industry consultancy Kantan Games.
Tencent also encountered a significant internal gaming bomb. Undawn, the zombie apocalypse shooter that Hollywood star Will Smith was hired to endorse, had a budget of nearly 1 billion yuan and involved more than 300 developers, two of the sources said. However, it was a spectacular failure.
Last month, a year after its launch, Undawn brought in just $287,000, according to research firm Upmagic.
Western companies are also beginning to shift away from outsourcing mobile game development to Chinese companies such as Tencent. For example, Microsoft’s Activision Blizzard just launched Call of Duty Warzone Mobile, which directly competes with Tencent’s Call of Duty Mobile.
To add insult to injury, Tencent’s top two games saw revenue decline during February’s week-long Lunar New Year holiday. Honor of Kings and PUBG Mobile, in their ninth and seventh years, respectively, are down 7% and 30% compared to last year’s holiday period, according to one of the people briefed on the matter. It is said that he was hit by
(1 dollar = 7.1979 Chinese Yuan)
(Reporting by Josh Ye; Editing by Brenda Goh, Edwina Gibbs)
