Redfinger | Competition between Netease and Tencent in the overseas gaming market

The competition between Netease and Tencent in China is very fierce. Because the domestic market has been a little bleak in recent years, they are trying to develop foreign markets and have begun an invisible competition in foreign markets. At present, the two companies have respectively acquired and invested in many console and mobile game manufacturers overseas, as well as a large number of game studios.

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

Rebel Wolves is currently developing a narration-based Dark Fantasy RPG on UE5. Konrad Tomaszkiewicz pointed out, “The studio will maintain full creative control and ownership of its IP. In addition, it will continue to operate independently. The funds provided by NetEase are the last part that needs full investment. With the resources to build world-class AAA games, we can now focus on the most important thing: development.”

Just a month ago, the survival and betrayal game “Dream Hunger” also received Tencent’s investment, which is no coincidence. After its official launch, the game ranked second in the global best-selling list, with more than 1 million sales in two months and more than 100000 online users. In addition, Tencent announced its investment in From Software, the developer of Elden Ring, while NetEase acquired Quantic Dream, the developer of Detroit: Come Human.

According to statistics, in 2022 alone, the number of NetEase’s investment in overseas game studios and the establishment of new overseas studios reached 10 (excluding NFT games), while Tencent was almost equal, reaching 9. The overseas investment war between two Chinese game head companies has been filled with gunpowder. 

The Competition Landscape of NetEase and Tencent

In January this year, NetEase launched a new studio founded by Toshihiro Nagoshi, a senior producer and executive chairman of Yakuza, called “Nagoshi Studio” for short. After that, the company set up studios for three senior senior employees of large overseas studios.

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

Last year, NetEase made six investments. In addition to the massive investment in Quantitative Dream, the other five investments are almost all for the founder of the studio. One of them has also invested in VR games. From this, we can see that they are optimistic about VR games.

Tencent has made a total of 9 overseas investments at present. Except for Inflexion, which has not yet launched products, almost all other companies’ products have been very successful. It is worth noting that compared with Netease, Tencent tends to favor the brand effect of well-known directors, while Tencent prefers successful manufacturers with mature products. Although their investment focuses are different, their goals are the same.

This is because Tencent has accelerated the layout of overseas studios in the past two years, such as F1 Studio, G1 Studio and LightSpeed LA Studio. From this point of view, although Tencent and NetEase are both investing freely overseas, their strategic directions seem to be different, and both have unified goals.

The Reason behind Fierce Competition 

First, stricter version number approval is bound to seek new opportunities overseas. Because there is no version approval number, game manufacturers can only publish a limited number of games, and can not ensure that the game is profitable, which is not conducive to the company’s development in the long run, while the overseas gaming market is relatively loose.

Second, the competition in the domestic mobile gaming market is becoming increasingly fierce. At the annual meeting of China’s game industry last year, China’s console gaming market disclosed for the first time that its revenue reached 2.58 billion yuan, up 2.234 billion yuan year-on-year. According to the data released by Ampere Analysis, the global mainframe market revenue in 2021 is close to $60 billion. Compared with the rapid development of the domestic market, the overseas market is broader, which is also the reason for their fierce competition.

In contrast, the more popular PC market is obviously more optimistic. In October this year, V News Agency announced that the maximum number of online users of Steam platform exceeded 30 million, but what many people may not know is that the proportion of players using Chinese has already 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 account for the vast majority of them.

Third, as the leader of the game industry, the relationship between Tencent and Netease is similar to that between Sony and Microsoft. On the one hand, due to various reasons such as investment slowdown after 2021. On the other hand, senior developers and studios are regarded as the competitive resources of the industry. By doing so, it can restrain the development of each other’s overseas markets in the future, and also bring more opportunities to the existing market in advance.

It should be noted that Microsoft and Google participated in the development of Android emulators. The Android subsystem in Windows 11 can run Android applications directly on the desktop, and the Google Play Games PC that Google will launch in 2022 can also run Android games on the computer. In the next few years, there are still questions about whether Tencent and Netease will devote themselves to developing cloud gaming platforms

The Promising Future 

We can foresee the near future. In the overseas market, we can see many domestic games developed by Tencent and Netease. At present, although they have various layouts and confrontations, they can gain more leading opportunities for future development. In some sense, this will certainly play an integrated role in the development of the domestic gaming market, and will further promote and enhance their strength in the game industry.

To be sure, for domestic game manufacturers, the overseas gaming market is full of unlimited opportunities and challenges, just like the Apollo 11 spacecraft that first landed on the moon. This competition will continue for a long time, and more and more game companies will participate in this competition and finally stand out. 


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