NetEase and Tencent have a fierce competitive relationship in the domestic gaming market. In recent years, not only in the domestic gaming market, but also in foreign gaming markets, an invisible competition has begun. At present, the two companies have acquired and invested in many console and mobile game manufacturers overseas.
Rebel Wolves, a new studio formed by former director of “The Witcher 3: Wild Hunt” Konrad Tomaszkiewicz and several former CDPR senior employees, announced NetEase’s latest investment. The deal also includes a minority stake, although the exact amount invested was not disclosed.
Rebel Wolves is currently developing a narrative-based dark fantasy RPG on UE5, and Konrad Tomaszkiewicz noted that “the studio will maintain full creative control and ownership of its IP. Additionally, it will continue to operate independently. Funding from NetEase is the last A part that requires all-in. With the resources to build a world-class AAA game, we can now focus on what matters most: development.”
It’s no coincidence that survival and betrayal game Dread Hunger also received investment from Tencent just a month ago. After its official launch, the game ranked second on the global bestseller list, with more than 1 million sales and more than 100,000 online users within two months. Elsewhere, Tencent announced an investment in From Software, the developer of Elden Ring, while NetEase acquired Quantic Dream, the developer of Detroit: Become Human.
It is estimated that in 2022 alone, NetEase’s investment in overseas game studios and the number of new overseas studios established will reach 10 (excluding NFT games), while Tencent will be almost flat at 9.
The Competition Landscape of NetEase and Tencent
In January of this year, NetEase launched a new studio founded by veteran Yakuza producer and executive chairman Toshihiro Nagoshi, referred to as “Nagoshi Studio”, after that, the company set up a studio for three senior employees of senior overseas large-scale studios .
It is worth mentioning that although the Montreal studio was not established in 2022 (it was established in 2019), NetEase still invited Emile Liang, the former chief producer of “Far Cry” and the predecessor of “Watch Dogs” 1st and 2nd generations this year. Jonathan Morin, the creative director, is in charge to further strengthen the strength of self-research.
The number of NetEase’s investments this year has reached 6. Except for Quantic Dream’s big acquisition, the remaining 5 are almost all directed at the founders of the studio. One of them was also invested in VR games. Considering that NetEase represented the most popular music rhythm game “Beat Saber” in 2018, this investment does not seem surprising.
Tencent has 9 overseas investments this year. Except for Inflexion, which has not yet launched a product, almost all of the other 8 companies have quite successful products for the market. It can be seen that compared with Netease, which tends to have a brand effect of well-known directors, Tencent prefers successful manufacturers with mature products.
This is due to the fact that Tencent has accelerated the layout of overseas studios in the past two years, such as F1 studio, G1 studio and LightSpeed LA studio. But what is interesting is that although a large number of star producers with a halo have also attracted a large number of overseas studios and invested a lot of money, their development philosophy is basically the same.
The Reason behind Fierce Competition
The overseas investment war between Tencent and NetEase is very reasonable and necessary for their development. There are three key factors affecting this.
First, the approval of the version number is more stringent and the quantity is controlled, which is destined to make going overseas the best solution in the short term. In 2022, Tencent and NetEase will only obtain the version numbers of 2 products respectively.
Second, the competition in the domestic mobile gaming market can already be described as brutal. At last year’s China Game Industry Annual Conference, the Chinese console gaming market was disclosed for the first time, with revenue reaching 2.58 billion yuan, a year-on-year increase of 2.234 billion yuan. According to the data released by the well-known statistical agency Ampere Analysis, the global console market revenue in 2021 is close to 60 billion US dollars. Compared with the rapid development in China, the big cake in the overseas market is also a must for the two game companies.
In contrast, the more popular PC market is obviously more optimistic. In October of this year, V Agency announced that the highest number of online users on the Steam platform exceeded 30 million, but what many people may not know is that the proportion of players who use Chinese has already exceeded one-third. Although this does not mean that the nearly 10 million Chinese users are all from domestic players, there is no doubt that Chinese players account for the vast majority of them.
Third, mutual containment. As one of the top game companies in China, the relationship between Tencent and NetEase is like that of Sony and Microsoft. This is more a game of business strategy. On the one hand, due to various reasons in the general environment, investment in the domestic market is sluggish, and overseas investment is undoubtedly easier to operate. On the other hand, whether it is well-known talents or mature studios with existing products, these can all be regarded as a form of game industry resources. The competition for resources will inevitably curb the development of the other party’s future overseas markets, and also open up existing markets for themselves in advance.
It should be noted that Microsoft and Google are involved in the development of the Android emulators. The Android subsystem in Windows 11 can run Android applications directly on the desktop, and Google’s Google Play Games PC, which will be launched in 2022, can also run Android games on computers. Whether Tencent and NetEase will devote themselves to developing a cloud gaming platforms in the next few years is still questionable.
The Promising Future
In the near future, we may see more overseas games developed by these two companies appear on the market, and we may also see more domestic games developed by these two companies shine in overseas markets. The current confrontation and layout is to gain opportunities and advantages for future development, which will inevitably promote the further integration and mutual promotion of domestic and foreign games and markets.
It is foreseeable that the overseas mainframe stand-alone market is full of infinite opportunities and challenges for domestic manufacturers, just like the Apollo 11 spacecraft that landed on the moon for the first time. Regardless of whether the version number will be loosened in the future, this “overseas war” may continue forever, and more and more powerful game companies will participate in this fierce competition.
