Redfinger | An Invincible War between NetEase and Tencent in Overseas Gaming Market

NetEase and Tencent have been competing quite fiercely at home, while this invisible competition still exists abroad. In particular, the two companies have acquired and invested in a large number of console and mobile game makers overseas in recent years.

Rebel Wolves, a new studio formed by Konrad Tomaszkiewicz – the former director of The Witcher 3: Wild Hunt and a number of former CDPR senior employees, announced the recent investment from NetEase. Although the exact amount of the investment has not been disclosed, the deal also includes a minority stake.

Rebel Wolves is currently developing a narrative-based dark fantasy RPG on UE5, and Konrad Tomaszkiewicz noted, "The studio will maintain full creative control and ownership of its IP. Additionally, it will continue to operate independently. Funding provided by NetEase was the last missing piece needed to go full throttle. With resources available to build a world-class AAA game, we can now focus on what matters most: development."

It's no coincidence that just one month ago, Dread Hunger, a game of survival and betrayal, also secured an investment from Tencent. Following its official launch, the game ranks the second place in best-selling list in the world with sales of over 1 million within two months and the number of people online exceeding 100,000. Further, Tencent announced its investment in From Software, the developer of Elden Ring while NetEase acquired Quantic Dream, the developer of Detroit: Become Human.

It's estimated that in 2022 alone, the number of NetEase's investments in overseas game studios and the establishment of new overseas studios reached 10 (excluding NFT games), while Tencent was almost equal, reaching 9. 

The Competition Landscape of NetEase and Tencent

Following the fact that NetEase unveiled a new studio from veteran Yakuza producer and executive director Toshihiro Nagoshi, simply called Nagoshi Studio, in January, the firm has set up its studio for three senior veterans of overseas major studios. 

It is worth mentioning that although the Montreal studio was established in 2019, NetEase still invited Emile Liang, former chief producer of Far Cry, and Jonathan Morin, former creative director of Watch Dogs, to further strengthen the ability of self-development.

6 investments from NetEase were conducted in the past year. In addition to the large investment in Quantic Dream, the other five were almost all for the studio's founder. One of them was also invested in VR games. 

Tencent made 9 overseas investments, and except for Inflexion, which has yet to launch its products, almost all of the other has quite successful products for the market. It can be noted that compared to NetEase, which tends to favor the brand effect of well-known directors, Tencent prefers successful manufacturers with mature products.

This is due to the fact that Tencent has accelerated the layout of overseas studios in the past two years, such as F1 Studio, G1 Studio and LightSpeed LA Studio. Although Tencent and NetEase invest a lot in overseas development, their philosophy seems to be different.

Reasons behind Fierce Competition

For one thing, stricter approval of the version number is destined to seek new opportunities overseas. Under such circumstance, major manufacturers are hard to produce more games, thereby allowing one of them to gain various popularity. 

Second, the competition in the domestic mobile game market can be described as fiercer than ever before. At last year's annual meeting of China game industry, the Chinese console game market was disclosed for the first time, with revenue reaching 2.58 billion RMB, up 2.234 billion RMB year-on-year. According to the data released by Ampere Analysis, the global console market revenue in 2021 is close to $60 billion. Compared with the rapid development of the domestic market, the overseas market is also a big piece of cake for the two game companies to compete.

In contrast, the PC market is obviously more optimistic. In October 2022, Valve announced that the highest number of online Steam platform exceeded 30 million people, but what many people may not know is that the proportion of players using Chinese has long exceeded one-third. Although this does not mean that nearly 10 million Chinese users are from domestic players, there is no doubt that Chinese players make up the majority of them. 

Third, as the leading players in the gaming sector, the relationship between Tencent and NetEase is similar to Sony and Microsoft. On the one hand, due to various reasons of the general environment like decelerating investment after the year of 2021. On the other hand, senior developers and studios are considered as the competition resources in the sector. By doing so, it can curb the development of each other's future overseas market, and also embrace more chances for the existing market in advance.

It should be noted that Microsoft and Google participate in emulators development. The Android subsystem in Windows 11 can run Android apps directly on desktops, while Google's Google Play Games PC to be launched in 2022 can run Android games on computers as well. In the following years, it remains doubts that Tencent and NetEase will be dedicated to developing cloud gaming platforms. 

The Promising Future

In the future, we may see more domestic games developed by these two companies in the overseas market. The confrontation and layout now are for future development to gain the leading-edge opportunity. In this sense, it will also inevitably promote the further integration and mutual promotion of the gaming markets at home and abroad. 

It is foreseeable that for domestic manufacturers, the overseas console market is full of infinite opportunities and challenges, just like the Apollo 11 spacecraft that landed on the moon for the first time. It's hard to define how long the competition will last. However, there is no doubt that more and more firms will participate in this competition sooner or later. 

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