Tencent Bets Billions on Gamers With More Fans Than NBA Stars

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Bloomberg Quicktake: Now published this video item, entitled “Tencent Bets Billions on Gamers With More Fans Than NBA Stars” – below is their description.

At the height of the global Covid-19 pandemic in October, more than 6,000 people packed into a new 25-acre stadium in Shanghai to watch the League of Legends world championship, one of the world’s biggest sporting contests. Another 45 million tuned in online, about as many as watched the six games of the 2020 NBA Finals on TV.

Asia’s most valuable company has set its sights on a billion-dollar esports arena that already boasts more regular viewers than the National Basketball Association or the National Football League. Tencent has placed pro gaming at the heart of its ambition to dominate online entertainment, from mobile games and video streaming to social media. It’s betting that esports will entice and retain the internet audiences it needs and eventually grow to something approaching the $10-billion-plus NBA.

Key to realizing that vision is Tencent’s blockbuster League of Legends battle arena title and TJ Sports, the outfit it set up in 2019 to organize and promote the game’s competitive play in China. While total revenue in TJ’s first two years just surpassed 1 billion yuan ($152 million), the fledgling company intends to create original content such as reality shows and livestream channels around its star players and teams, and peddle merchandise.

“Esports is like the Super Bowl, which isn’t just a sport event but also a vehicle of art and entertainment,” said TJ co-Chief Executive Officer Leo Lin. “We are going for the direction of connecting esports with our games and wider entertainment business.”

Esports show how Tencent thinks about its long-term future. The world’s largest games publisher has invested billions of dollars in talent agencies, streaming sites and tournament organizers to create the infrastructure necessary to turn pro gaming from a niche into an instrumental part of its growth strategy. TJ expects to double overseas viewership as soon as this year and aims to do the same with media rights revenue from outside China.“Tencent’s investing in esports for the long haul, because it breaks the boundaries between different businesses from licensing to sponsorships and ticket sales,” said Chundi Zhang, a gaming analyst with Ampere Analysis. “Especially with competition for attention intensifying and user acquisition costs growing in the gaming market itself, esports still has huge untapped potential.”

Shenzhen-based Tencent, which operates some of China’s largest Netflix-style and e-book services as well as producing tentpole films and games, already knows how to monetize popular content.

Not only do Tencent’s investments have considerable value — $185 billion as of Dec. 31, up from $131 billion at Sept. 30 — but many provide strategic relationships that help drive revenue. Partnering with content providers across video (NBA, NFL, HBO), video games (FIFA, PUBG, Fortnite) and music (Universal, Warner, Sony) enhances service offerings and expands Tencent’s target audiences.

— Robert Schiffman and Suborna Panja, analysts

Competitive play in Tencent-published games like Honor of Kings and PUBG Mobile enhances the longevity of the firm’s biggest cash cows and feeds its content divisions. That in turn helps portfolio companies like Huya Inc. and Bilibili Inc. Apart from reality shows and music festivals, Tencent last year debuted a drama series called CrossFire, which tells the story of a wheelchair-bound teenager trying to make it as a pro gamer in the online shoot-em-up by that name.But esports is also a key gateway to tapping foreign audiences for Tencent, which hasn’t struck gold on any app quite like ByteDance Ltd.’s video sensation TikTok. The company reaches most people outside China through games like PUBG Mobile — among the most popular mobile esports titles in Southeast Asia — and League of Legends, which is regularly played by tens of millions worldwide.

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