Tencent Shifts Strategy to Focus on Own IPs

Despite strong year-end results, Tencent is not satisfied with its performance. In the future, the Chinese giant will focus more on its own games and less on third-party IPs.

Tencent generated revenues of 609 billion yuan (78 billion euros) across all its businesses in 2023, up ten percent from 2022. The domestic games segment brought in 126.7 billion yuan (16.3 billion euros), up two percent year-on-year. The international games segment reached 53.2 billion yuan (6.8 billion euros), up 14 percent year-on-year. This means that almost 30 percent of games revenue came from international business, mainly from PUBG Mobile and Valorant. Despite this, revenue in the fourth quarter of 2023 was down slightly year-on-year.

Despite these strong results, Pony Ma, Tencent's founder and chief executive, is not happy with the performance of the games division. According to Reuters, Tencent plans to move away from big-budget mobile games based on third-party franchises and focus more on first-party titles.

High development costs, royalties to IP owners and mobile store fees are cited as reasons. Especially as competitors such as NetEase with Eggy Party and HoYoverse with Genshin Impact have had great success with their own games. "We're focusing on fewer bigger budget games. Typically, we're seeking to make the biggest bets around games that either iterate on a successful IP ... or games that are iterating around proven gameplay success within a niche and taking those to a more mass market," Tencent Chief Strategy Officer James Mitchell told an earnings call.

According to the report, Tencent has taken hundreds of developers away from Assassin's Creed Jade and put them to work on its own title, DreamStar, which is why the Ubisoft title is not expected to be released until 2025. Neither Ubisoft nor Tencent have commented on this article. Serkan Toto, founder of Kantan Games, was also quoted: "Mobile games studios have learned that IP is not the magic bullet for user acquisition it once was."

Electronic Arts announced the cancellation of Apex Legends Mobile last year after the Tencent developed title fell short of expectations. A mobile game based on Square Enix's NieR franchise is also said to have been cancelled because a suitable monetisation model could not be found. In particular, the new Call of Duty Warzone Mobile was developed in-house by Activision Blizzard and not by Tencent as was the case with Call of Duty Mobile. And not all went well with the company's own IPs either. "Undawn", a zombie apocalypse shooter starring Hollywood star Will Smith, flopped last year. According to Appmagic, the game, which had a budget of almost 130 million euros, did not even make a million euros. As a result, Tencent has launched the Spring Bamboo Shoots Project to incubate in-house games, offering budgets of up to 39 million euros per project.

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