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KickStarter Tencent goes on a European shopping spree

Anthedon

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Shadorwun: Hong Kong Divinity: Original Sin 2 Pillars of Eternity 2: Deadfire
China’s Tencent goes on a European shopping spree
The company is buying stakes in the Continent’s video game industry, with little oversight.

GettyImages-1233144172-1320x928.jpg

Tencent has invested in at least seven European game studios in 2021 | Noel Celis/AFP via Getty Images

By Pieter Haeck
August 18, 2021 2:56 pm

Europe's video game industry has a new benefactor.

The Chinese tech giant Tencent is buying up stakes in multiple European game studios that are well known in the Continent's industry, a market worth €21.6 billion. Some analysts have described the move as part of Tencent's "silent pursuit of global gaming domination."

This year alone Tencent invested in at least seven European game studios, analysis by POLITICO learnt, with deals both big — acquisition of listed companies — and small — stakes in private companies — in Sweden, Finland, France, Germany, the U.K. and the Czech Republic.

But while Europe has fretted over Chinese companies buying up semiconductors or robotics firms, Tencent's gaming pursuits have barely gotten any scrutiny. Experts say that's because regulators hardly pay attention to the video game industry, which they say is a strategic mistake.

Tencent's recent pursuits are in addition to big assets it already possessed, like Finnish Supercell, the creator of the wildly popular mobile game Clash of Clans.

The total worth of Tencent's investment is difficult to determine, as the Chinese company uses different subsidiaries to take a stake in companies, many of which are private.

The size of the companies has varied. On July 19 alone, Tencent acquired two game studios in a day: U.K. Sumo Group — worth more than £900 million and with over 1,000 employees, and worked on hits like the Hitman and Sonic the Hedgehog series — and Swedish Stunlock Studios — with around 30 employees in tiny Skövde.

Tencent's acquisition did not spark a debate in Westminster. The U.K. government was unlikely to intervene, analysts of investment group Shore Capital said in a note. It was in sharp contrast with protest by British MPs just days earlier against a Chinese takeover of a Welsh semiconductor firm.

The same thing happened elsewhere. The French studio DONTNOD Entertainment and Finnish Remedy Entertainment (known for its work on the Max Payne series) did not flag any investigations when Tencent bought stakes in them. Bohemia Interactive, a Czech company, which mostly designs military themed games, said it was "not aware" of concerns raised.

Why?

Under the radar
"The reason why people haven't looked so intensely is that the potential security implications are not that clear as they are in other industries," Jan Weidenfeld, policy director at the Mercator Insitute for China Studies, said. "The game industry also isn't appreciated in many government quarters for its economic magnitude."

By overlooking its gaming industry, EU capitals are underestimating its value, and in some cases, its ties to data protection and national security, experts said.

The bloc ignores the fact that video games collect vast amounts of user data, Weidenfeld said.

"Personal data is collected to register for some of the services, telemetric data is being collected, faces are being scanned as a mechanism to establish if a player is old enough to play the game. This all has security implications."

Last month, Bild reported that Tencent eyed a takeover of German game developer Crytek, which provides military simulation programs to train Western armies. Crytek employees feared that, if sold, the game engine could be used "for military purpose" by China's army. The ruling party CDU called for a close look on a potential deal.

The European Commission did not comment on specific deals.

Trouble elsewhere
Tencent is unlikely to fundamentally alter the games' content, according to Daniel Ahmad, analyst at Asia-focused game research firm Niko Partners. "Chinese game studios have generally been fairly hands off." He added: "There are not many examples of them changing content or the management of acquired studios."

Czech Bohemia Interactive confirmed that, while a Tencent representative will join the board, the studio stays under full control of the two founders. Tencent follows this approach generally, it said. "We aim to be a supportive commercial partner," a Tencent spokesperson said. "Our philosophy is to give investees the freedom and flexibility to do what they do best."

But that approach was not enough to assuage American regulators' concerns.

In November, the Committee on Foreign Investment, which is chaired by the U.S. Treasury Department, asked gaming companies including Riot Games — a Tencent subsidiary, and creator of the popular League of Legends — and Epic Games (of Fortnite fame), in which Tencent has a 40 percent stake, to give more information about data-security protocols. Tencent is in talks with U.S. authorities to secure its stake in both, Reuters reported in May.

Tencent is being scrutinized at home too, as part of China's crackdown on its tech companies.

The Chinese antitrust regulator blocked a merger last month of China's two biggest video game streaming platforms — one in which Tencent holds a majority stake and the other in which the company has a minority stake. Another blow followed in August, when an article by state-affiliated news outlet Economic Information Daily called out the gaming sector, briefly labelling games as "spiritual opium". Tencent shares plunged, as its game Honor of Kings was mentioned.

Following developments in China and the U.S., Europe is likely to pay more attention in the future.

"As Tencent grows, it will no doubt face additional scrutiny," Ahmad predicts.

https://www.politico.eu/article/china-tencent-video-game-industry-investment-europe/
 

Wyatt_Derp

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John Carpenter has a new movie coming out related to this story. It's called Big Trouble in Little Euro. It's gonna star The Rock as a pasty German truck driver who has to battle ancient Chinese bankers who are trying to steal his truck and give it to a recently arrived Pakistani immigrant.

*only on Netflix*
 

J1M

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I think journos consistently get this backwards. I think these companies pitch to Tencent and apply for them to purchase a 5% stake so they can sell things in China. Tencent is probably attractive because they have shown the required government ties, and are so big the risk of micromanagement is lower. Plus it's free money for indies to keep the lights on.
 

J1M

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Should have asked a native English speaker to help them pick the brand name.
 

laclongquan

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I think journos consistently get this backwards. I think these companies pitch to Tencent and apply for them to purchase a 5% stake so they can sell things in China. Tencent is probably attractive because they have shown the required government ties, and are so big the risk of micromanagement is lower. Plus it's free money for indies to keep the lights on.
Or having their own agenda to push.
 

Zeriel

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John Carpenter has a new movie coming out related to this story. It's called Big Trouble in Little Euro. It's gonna star The Rock as a pasty German truck driver who has to battle ancient Chinese bankers who are trying to steal his truck and give it to a recently arrived Pakistani immigrant.

*only on Netflix*

I think you mean The Wok

the-wok-the-rock.gif
 

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