Tencent Powers Up With a Game-Streaming Super Platform -- Heard on the Street
October 13 2020 - 7:23AM
Dow Jones News
By Jacky Wong
Tencent is already very dominant in mobile games, but a
game-streaming giant under its control is a nice power-up--and
could be a new way for the company to promote its own content.
Chinese game-streaming platforms Huya and Douyu, equivalents of
Amazon's Twitch in China, have agreed to merge in an all-stock deal
Monday to create a $10 billion industry giant. Tencent, a
substantial shareholder of both companies, will have a 67.5% voting
right in the combined company. Huya and Douyu, which have more than
330 million monthly active users who watch top gamers play
videogames on their platforms, together have more than 80% of
China's game-streaming market. There is likely some overlap between
their user bases, but the combined company will without a doubt be
the biggest game-streaming platform in China. Tencent will also
fold its smaller platform, Penguin e-Sports, into the combined
company.
A growing esports market clearly appeals to Tencent: Huya and
Douyu's revenue have both grown more than 40% in the first six
months of 2020 from a year earlier, with the pandemic helping drive
bored homebound people to their platforms. Combining Huya and Douyu
will give the new company better bargaining power: a big part of
their costs is incentives and bonuses for the best streamers.
With a bigger user base and a backer like Tencent, the combined
company may be able to explore new ways to make money from their
audience too. Both Huya and Douyu make most of their money from
fans buying virtual gifts for their favorite players. That's unique
to the Chinese market: Platforms like Twitch and YouTube make money
mostly from advertising or subscriptions.
The merger will also help fend off competition from new entrants
like Bytedance, the owner of TikTok, and Bilibili, which counts
Sony as its shareholder. These companies, which have attracted many
young users, are competing for eyeballs for game-streaming
specifically and also online entertainment more broadly.
A dominant platform will mean more than just more revenue from
game streaming. Tencent could use the platform to promote its own
games, keep gamers playing and distribute new games. That could be
the bigger game Tencent is playing.
Write to Jacky Wong at JACKY.WONG@wsj.com
(END) Dow Jones Newswires
October 13, 2020 07:08 ET (11:08 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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