Sony, Tencent, NetEase continue to hunt for contracts to expand new formats, markets

Sony, Tencent, NetEase continue to hunt for contracts to expand new formats, markets
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Revenue from mobile games accounts for more than half of the mobile gaming market. Sony is looking to branch out beyond consoles with its new dedicated PlayStation mobile gaming division.

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Sony’s PlayStation has long dominated the gaming console market.

But the business model for console games has changed. It’s not just about selling hardware and then hoping people buy new games. It’s about continuing to generate revenue from these games through regular updates where people spend money and sell subscription services.

Sony’s stream of deals, particularly its acquisition of Bungie, underscores this push.

‚ÄúTheir goal is to have enough content to encourage players to buy their own hardware, pay a monthly fee for a subscription service run by PlayStation (PS Plus), and buy the occasional digital game through the PlayStation Store. 30% reduction,” Tom Wijman, market leader for games at data company Newzoo, told CNBC.

“Dismantling studios is the most unfortunate way to secure exclusive content for their ecosystem – especially in response to the acquisition spree of one of Sony’s main gaming rivals, Microsoft.”

Sony is also looking to expand beyond consoles. Last week, the Japanese giant said it was setting up a special division to oversee the development of mobile games, a relatively new initiative for the company, which has dominated consoles for years.

The acquisition of Savage Game Studios, which is dedicated to mobile games, is another key part of the strategy.

“Sony is stepping out of its comfort zone to stay competitive,” Wijman said.

According to Newzoo, revenue from mobile games accounts for more than 50% of the total gaming market, while consoles account for about 27% of sales. So Sony is after a bigger piece of the pie.

Sony’s acquisitions will help it strengthen its intellectual property and game library as it looks to expand into mobile games.

Tencent and NetEase

China’s two biggest game players, Tencent and NetEase, have faced a tougher domestic market, increasing the importance of overseas investment and acquisition strategies.

Last year, Chinese regulators It limited the amount of time that under 18s could play online games and froze the approval of new titles. In China, games need a green light from regulators to release and monetize. These are approvals only started again in April.

Meanwhile, the resurgence of Covid-19 in China and the subsequent lockdown in the country’s major cities have hurt economic growth. This was the reason worst quarter of revenue growth For some of China’s tech giants, including Tencent.

With a more challenging domestic market, Tencent and NetEase looked abroad for growth through acquisitions and investments.

“Tencent and NetEase built their gaming businesses primarily in their home country of China. Now that their domestic market is increasingly regulated and difficult to operate, these two companies will accelerate their global expansion strategy,” Wijman said.

Chinese tech giant Tencent announced its first ever quarterly revenue decline

Tencent owns or invests in some of the world’s biggest gaming companies, including League of Legends developer Riot Games.

NetEase’s strategy is focused on acquiring high-quality intellectual property. With the acquisition of Quantic Dream, the Hangzhou-headquartered firm gets the opportunity to publish the upcoming Star Wars Game. NetEase has already been released based on mobile games Harry Potter and the Lord of the Rings franchise.

For the two giants, owning or owning a stake in the studios behind international mega-hits in the gaming world has become a key part of the strategy.

While NetEase has traditionally been less aggressive in its deal activity than Tencent, it has stepped up its efforts over the past year.

Another part of the investment strategy for both companies highlights their ambitions in the console sector. NetEase and Tencent grew by focusing mainly on PC and mobile games rather than consoles, which had been banned in China for 14 years until 2014.

But two behemoths started focus their efforts on console gaming.

NetEase hired A veteran of the console industry to run a Japanese game studio earlier this year. And Tencent-owned developer TiMi Studio has opened offices in Montreal and Seattle to focus on PC and console games.

Again, acquiring and investing in other game studios could help both companies gain access to IP for games on consoles.

Tighter regulation and the search for growth in China could prompt NetEase and Tencent to continue their investment and acquisition strategy.

“Finally, if Chinese government regulation continues to put pressure on NetEase and Tencent in their markets, I think they will also be eager to look at M&A,” Wijman said. “Their global expansion strategies have just begun.”

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