Market Insight

Tencent UP 2018 Conference: Fornite officially coming to China

April 25, 2018  | Subscribers Only

Chenyu Cui Chenyu Cui Senior Research Analyst – Games, IHS Markit

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As announced at its UP2018 conference, Tencent is to invest $16 million in Fortnite-related esports. The company has already secured a licensing partnership with BlueHole, the creator of Fortnite's main competitor, Publisher Unknown's Battlegrounds (PUBG), for China. PUBG's release has taken longer than expected thanks to localisation and other adjustments required by the strict censorship being placed upon battle-royale titles.

Although Tencent released two titles based on PUBG in order to explore the mobile-based battle-royale market, the success of battle-royale games Wilderness and Terminator 2 from its rival NetEase have impinged on its dominant position in the market. It's worth nothing that its aforementioned mobile titles aren't yet major revenue sources, but can still be useful in the interim for cultivating an engaged userbase.

Fortnite should bring new opportunities for Tencent in the Chinese battle-royale market competition. Compared to PUBG, Fortnite’s cartoon-like character design, as well as construction elements present in the gameplay, could change the game's theme enough that its approval process completes quickly and more easily than for other titles in this category. The game's freemium structure, in tandem with lootboxes and other in-game item sales, could see it generate significat revenues, too.

An expanding IP-deployment strategy

After seeing success with several titles adapted for mobile - such as Legacy TLBB, JX Mobile, and Dragon Nest - Tencent has expanded its appetite for acquiring IP with which to drive its pipeline. Naruto OL Mobile, Perfect World Mobile and games adapted from web-based visual novels are helping expand Tencent’s already-large portfolio. Moreover, they could also help Tencent to move into new sub-genres. The company's dominant distribution channel and marketing clout enable it to become a powerful parter to developers and other PC-gaming companies that have yet to publish mobile games off their own backs.

Esports becomes the focus for 2018

Tencent's esports business started with TGA (Tencent Games Arena) in 2010, where it was initially driven by Crossfire. More recently, it's expanded to include 11 esports-related events. With involvement across the whole supply chain from games operation to video streaming, Tencent has consolidated its leading position in esports, and plans to enhance it by rolling out even more game events and championship broadcasts. Licensing Fortnite and reviving Red Alert from the Command & Conquer series for mobile is helping diversify its portfolio here.

Next up: Experimental games

Tencent announced plans to release four 'experimental' games, each of which is designed to bring players closer to cultural or socially-focused themes, enriching their knowledge as they play.

Since the national media in China criticised the negative impact that Honor Of Kings could have on young people, Tencent is taking measures to counteract this coverage by establishing titles with some obvious measure of cultural or educational value. These could help improve Tencent's reputation, and gain greater government support, which could then improve the approval process for other, similar types of game.

Geography
China
Organization
Tencent
Research by Market
Media & Advertising
Category
Games
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