Chinese gaming giants Tencent, NetEase snap up more foreign studios

Internet technology company Netease’s logo is seen at the China Digital Entertainment Expo and Conference, also known as ChinaJoy, in Shanghai, China, 30 July 2021. Picture taken July 30, 2021. REUTERS/Aly Song

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PARIS, Aug 31 (Reuters) – Chinese video game giants Tencent Holdings (0700.HK) and NetEase have continued their hunt for major overseas game studios, with the former acquiring a large stake in Japan’s FromSoftware and the latter acquiring French developer Quantic Dream.

Tencent, operator of messaging app WeChat and the world’s largest gaming company by revenue, has acquired a 16.25% stake in FromSoftware Inc, the developer behind recent action hit Elden Ring, parent company Kadokawa Corp (9468 .T) with On Wednesday.

The investments by Tencent and Sony Group Corp (6758.T), which Kadokawa also said on Wednesday will take a stake in FromSoftware, will collectively bring the company 36.4 billion yen ($263 million).

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NetEase, China’s second-largest gaming company, announced shortly thereafter that it was acquiring Paris-based company Quantic Dream, best known for the development of the role-playing game Detroit: Become Human, for an undisclosed amount of money.

The two high-profile deals reflect the Chinese gaming giants’ continued focus on the international market as growth in the domestic market, which has been crucial for both Tencent and NetEase, slows.

China’s video game industry revenue fell for the first time in the first half of 2022, a July report showed. Continue reading

Beijing launched a full-scale regulatory crackdown on China’s high-growth tech sector last year, focusing on what regulators called “disorderly expansion of capital,” where acquisition sprees by Chinese tech companies had alarmed regulators, though this is now waning.

Tencent’s deal with FromSoftware follows a series of gaming investments it made in Japan prior to the crackdown that gave it stakes in PlatnumGames and Marvelous Inc (7844.T).

“The investment shows that Tencent is still actively working to expand its presence outside of China at scale,” said Serkan Toto, founder of consulting firm Kantan Games, describing FromSoftware as a “commercial and creative powerhouse.”

FromSoftware’s Elden Ring, a collaboration between veteran game director Hidetaka Miyazaki and Game of Thrones writer George RR Martin, had sold 16.6 million units worldwide by the end of June.

NetEase said the acquisition of Quantic Dream will give the company its first studio in Europe. It had previously acquired a minority stake in Quantic Dream, which is working on an upcoming Star Wars game, back in 2019.

As government crackdowns ease in China, tech companies are scrutinizing more gambling deals. Last month, US gaming company Unity spun off its Chinese unit, which will have Alibaba Group and ByteDance as shareholders. Continue reading

Tencent also plans to increase its stake in French gaming giant Ubisoft, the developer behind the Assassin’s Creed franchise, Reuters reported last month. Continue reading

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Reporting by Josh Ye, Tassilo Hummel and Sam Nussey; Adaptation by Louise Heavens and Jason Neely

Our standards: The Thomson Reuters Trust Principles.