HONG KONG (Reuters Breakingviews) – Tencent dives into video games. Mobile blockbusters generated quarterly sales of $ 21 billion. Upcoming headlines are expected to give boss Pony Ma some cover against regulatory threats and fierce competition from ByteDance. Respite, however, can only be temporary.
Quarterly financial results released Thursday confirm the Tencent pandemic windfall is over. Revenue for the three months to March increased by a quarter compared to the same period in 2020, but online gaming growth has slowed significantly to 17% as life in China has generally returned to normal. Even so, titles like “Honor of Kings” and “PUBG Mobile” contributed a respectable revenue of $ 6.8 billion for the period.
Ma also has a pipeline of more than 40 games to support her company’s $ 750 billion bottom line in the near term. This should provide a much needed distraction for investors. ByteDance, the owner of viral video apps TikTok and Douyin, is emerging as a formidable rival. Earlier this year, it spent $ 4 billion to buy a developer as part of a big move to strengthen its games division.
Additionally, Chinese trustbusters are preparing to impose a fine on Tencent that could exceed 10 billion yuan, or $ 1.6 billion, Reuters reported in April. This will be manageable, given that the company generated operating cash flow of about five times that amount in the last quarter. However, regulators are also reviewing Tencent’s prolific negotiations. Its Spotify-like subsidiary, for example, could be forced to sell assets and give up exclusive music rights. Tencent shares have fallen about a fifth from this year’s high, wiping out nearly $ 200 billion in stock value.
For years, the company has separated its vast entertainment and social media businesses. There are signs that a more coherent strategy is emerging. Along with its results, Tencent said it would combine its Netflix-like business with another video app. It is also in the process of offering the approximately 600 million monthly active mobile users on its QQ messaging service more games to “better integrate social and content consumption experiences”. Recently, Tencent installed a former QQ executive at the helm of its music streaming service. Tencent is expected to have several lives beyond games.
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NEWS FROM THE CONTEXT
– On May 20, Chinese Tencent reported revenue of 135 billion yuan ($ 21 billion) in the three months ending March, an increase of 25% from the same period a year more early.
– Adjusted profit, after excluding one-time fair value gains on investments and other items, increased 22% year-on-year to 33.1 billion yuan.
– For previous author columns, Reuters clients can click [MAK/]
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