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Chinese tech-giant Tencent have revealed their plans to expand beyond their native China, with the help of Nintendo Consoles.
The Wall Street Journal‘s Takashi Mochizuki reports, according to “a Tencent official, who asked not to be identified.”
“What we want is to expand from China, and one target is console game players in the U.S. and Europe. We hope to create console games with Nintendo characters, and learn the essence of making console games from Nintendo engineers.”
It was also reported that when Nintendo began limited distribution of Nintendo Switches in China via Tencent, Nintendo Shares rose 14%. Nintendo did not respond to The Wall Street Journal’s comments.
Analysts from Niko Partners (an Asia-focused games analytics company) also spoke to The Wall Street Journal on what Tencent were doing. While Daniel Ahmad focused on how Chinese developers were focusing more on women, managing partner Lisa Cosmas Hanson downplayed the importance of console game development for the US market to Tencent. She then gave an unintentionally chilling theory.
“Tencent is skillfully pursuing silent global domination, via expansion primarily in the form of major and minor investments in [videogame] industry companies around the world without rebranding them as Tencent,”
Tencent own 40% of Epic Games (the Epic Game Store, Fortnite, Gears of War), 80% of Grinding Gear Games (Path of Exile), and 100% of Riot Games (League of Legends); as well as smaller shares in Ubisoft, Activision Blizzard, Paradox Interactive, Funcom, Fatshark, and more.
Analysts have also begun to theorize that Tencent could be allowed to use Nintendo IPs and characters in mobile games in the region. This may have been confirmed by Nintendo president Shuntaro Furukawa in a Q & A session with investors.
In the Six-Month Financial Results Briefing for Fiscal Year Ending March 2020 Q & A Summery document, question #7 (page 4), features an investor question about the company’s business plans in China.
Furukawa explained their plans to release the Nintendo Switch in the country, but even if they receive permission during the current fiscal year
“I’d like to check on the progress of your business plan in China. There was a recent media report that software had been approved, but there doesn’t appear to be much change. Are there any obstacles? Going forward, when do you expect to see the effect of this initiative on earnings?
Furukawa: We are working together with Tencent to prepare for the launch of the Nintendo Switch in China, as we have previously announced. There have indeed been media reports including that some products such as software have been approved. We need to, however, obtain various approvals including these before launch, so we are currently working through each one of these processes. When specific information can be announced, I believe Tencent will make an announcement in China, and Nintendo will then share the necessary information in line with their announcement.
We have not factored the sales in China into our financial forecast for the current fiscal year, and even if the launch does occur during the current fiscal year, we do not expect a significant impact on this year’s business results.”
While this seems like both companies will mutually benefit from the deal, there are factors that could give hurdles to both.
The Chinese government recently introduced new laws to limit the amount of time children spend gaming. In November 2018, Tencent had begun monitoring the time those under 12 spent playing their online games, and presenting a legal ID. This was after the company had lost $20 billion in August 2018, after the Chinese government had recommended fewer game approvals. Tencent’s expansion into the western market seems to make a little more sense in at least one way.
While the Chinese Online Games Ethics Committee banned nine games in December 2018, the Chinese government approved of over 80 games in January 2019 after a months-long freeze. The Financial Times claimed that there has been “bureaucratic infighting” from a media regulator, before a new one was formed.
In the west, “getting into bed with China” could not be a more troubling phrase in recent months- especially to gamers. This started with a concern of how much Chinese investment and audience-size affects American business’ decisions, after NBA Houston Rockets’ General Manager Daryl Morey showed his support for the Hong Kong protests at the start of October 2019, resulting in the Chinese government refusing to broadcast NBA games in China.
Since then NBA officials have been doing their best attempts at damage control. South Park’s “Band in China” episode also mocked entertainment companies such as Disney attempting to appeal to Chinese government censors.
There is also an extensive list of actions companies have taken to avoid upsetting the Chinese government in the last few years. These include the denial of Tibet and Taiwan as ever having been independent nations (even referring to Taiwan as its own country by accident), mentions of the Tienanmen Square Massacre, giving cloud and smartphone encryption keys to Chinese authorities, removal of intentionally pro Hong Kong comments and works, and firing employees for supporting the Hong Kong protests.
This came to a head in the video game industry, after professional Hearthstone player Chung “blitzchung” Ng Wai stated pro-Hong Kong protest statements in a post-match interview, Blizzard Entertainment suspend the player and the two casters. Gamers and free speech advocates rallied against the company with protests.
Many suspected it was due to Blizzard wanting to remain in the Chinese market, should it explode in popularity as many economic analysts claim. We took a look at Blizzard’s financials ourselves, and found the company’s total profit from the Asia-Pacific region was less than 13%. Blizzard later made two public apologies, emphasizing “our relationships in China had no influence on our decision.”
Some are concerned that Chinese businesses and investments will continue to invest in the west- yet demand they obey Chinese laws- essentially making the western company produce products for China and slowly turn away from the west. Hanson’s theory on what Tencent are doing would match this modus operandi, even if Tencent develops games not designed for release in China.
Have Tencent hopped out of the frying pan and into the fire? Will Nintendo’s brand resonate with China, in-spite of not building up nostalgia and appeal for generations?
What do you think? Sound off in the comments below!