Business of Esports TV: Tencent vs ByteDance

(Livestream #132)

In this segment, we discuss Tencent teaming up with Microsoft to develop a slew of games in an attempt to stick it to rival ByteDance.

The Business Of Esports brings you news, debates, and all the information you need to know about the gaming sector, the world’s fastest-growing market. With Paul “The Profit” Dawalibi leading the charge, and a variety of special guests, BoE TV is the only place to find insider information on the esports industry!

Check out the full livestream here:

Paul Dawalibi 59:15
Tencent in the news here. Launch Tencent launches 60 new video games partners with Microsoft as rivalry with bytedance heats up. So basically 10 cents Timmy studios and Microsoft’s Xbox Game Studios formed a strategic partnership. And as part of this partnership, and at their annual Tencent annual video gaming conference, they announced more than 60 new titles coming from their game studios. I mean, when I saw this, I actually thought it was a typo because 16 new games is more games than I think maybe Activision Blizzard has made in the entirety of its existence. But does anyone think this is just an unbelievable number? Is that is Tencent just going to flood the market with new games? And obviously, some of these are like mobile games and things like that, right? So it’s not all like triple a blockbuster on your PC, whatever. But Can anyone keep up with Tencent at this point? And now 10 cent plus Microsoft from a game development perspective. Jeff, I don’t know your thoughts, thoughts on this? No,

Jeff Cohen 1:00:36
no one can keep up a tent. I mean, it’s it they are a machine on the investment side, and they also hold the keys to China. So it’s almost like you have to do business with them as a Western publisher. Either that or you’re, you know, you have to go to netease. Or like there’s, you know, two other kind of names. Like dance. Yeah. Bite dance is interesting as a competitor, because, you know, we don’t we obviously know about them from tik tok. We don’t hear about them in gaming, I think in the West quite as much, but I do think they probably will, will probably, you know, start making more noise. Forgot what your initial question was,

Paul Dawalibi 1:01:12
you know, can I just keep on do and sighs right.

Jeff Cohen 1:01:15
It’s impressive. Yeah. 60 is? To your point, I think a lot of those are probably mobile games, or maybe China versions of like Call of Duty mobile Apex legends like they can include, you know, all of those as as new games. I do think the Microsoft partnership with Team E is interesting, because team is typically known as a mobile publisher. So what are what are they doing with Microsoft? I think that’s, that was probably bigger, more interesting to me than the 60 being, you know, a big number.

Paul Dawalibi 1:01:46
So you’re telling me if your EA are your Activision, right? You’re not concerned at all, when you see Timmy and and Microsoft together. And under the Tencent umbrella announcing 60 new games like, are you not worried that they can sort of just flood the market with enough content every single year that, that, you know, you’re sort of one game every four or five years kind of model? Maybe stops resonating? Right, because people always want the new new.

Jeff Cohen 1:02:19
I don’t think in the West, that’s typically a strategy that works. I mean, there’s already tons and tons of games that flood onto steam daily. But the franchise’s that are popular with the IP that’s popular, tend to resonate in the West, at least on PC and console. Mobile has always been that, you know, massive flood of, of stuff on the eyes to Apple Store. And that’s why mobile gaming is its own kind of different beast and customer acquisition costs. And actually, getting people to download your game is such is really the biggest part of mobile gaming, the actual game is sort of secondary. But I do think they probably these, these studios in the West are probably worried just as they look at the scale and the resources that Tencent has. And at some point, they’re going to turn their attentions to the west, just because it’s such a big market, and they already have China, basically on lock. At some point in order to grow, they’re going to need to move west and I know Tencent has sort of started doing that they have a lot of investments in a lot of these studios, but they also I think, have a presence in in the US in the West. So I do think that is something for for the bigger players to worry about. You know, can Tencent throw enough resources, I don’t think it would be a flood the zone type thing. Does that strategy, I don’t think would work. But could they create a big IP that competes with the taxes, the Call of Duty’s the Grand Theft Auto was the world they showed you have the resources, so it’s possible?

Lindsay Poss 1:03:50
Well, to that end, good. Because I don’t know that much about the Microsoft strategic partnership, either. Could one of you like talk about that? And whether or not you think that more of these Western companies will partner with the, you know, these powerhouses in space?

Paul Dawalibi 1:04:07
Yeah, I think that’s Christians question. You’re right. Which, which is are the games directed to the US market? This article specifically doesn’t say, I don’t I didn’t watch the announcement live or the games conference live? And it obviously wasn’t an English. And so I also don’t know if they did say, but I would, I would bet good money, that some portion of that 60 games because of the Microsoft partnership will come West. Is it five games 10 games? Is it two games? I don’t know. But my guess is the big part of the Microsoft partnership is access to the development studios in the West and the audiences in the West.

Lindsay Poss 1:04:47
Is there any like specifics on what the partnership is? Again? I’m asking because I don’t know about it. So I don’t know. Like it might. It might just be called a strategic partnership. But I just I was just curious. If there was anything about what the

Paul Dawalibi 1:05:00
actual I haven’t seen much about it, it happened literally like a few days ago.

Jeff Cohen 1:05:06
So it just be like a cross publishing agreement where it’s like, okay, team is gonna put games on Microsoft Store on the Xbox. And you know, some of the Xbox games will get access to China through whatever Chinese PC steam do whatever form Tencent has,

Paul Dawalibi 1:05:24
what is interesting question here, guys, I want I want I want this a good discussion around this. Well, let’s quality over quantity Tencent can produce a bunch of games, but gamers will ultimately choose the titles lay like marketing dollars also helps. I don’t think Christians wrong here. Right. And, Jeff, I know you made that point. It’s more though that games are a little bit like investments, or Broadway shows or movies, right? Like, if you put out 60 of them, there’s a higher chance you will have a fortnight in there, right? Because you don’t really know. Yes, the the quality may be slightly lower. But like among us isn’t the high quality game, but it became a huge hit, right. And so the chance of having a hit goes way up, as opposed to putting out two games, and hoping what like desperately that one of them’s a home run. I just think game gaming has become something of a home run business from a developer and publisher perspective. And by Tencent putting out 60 games, they’ve massively increased their chance of a home run. I don’t know if it’s actually

Lindsay Poss 1:06:36
in the in the mobile market, like the the mobile market is all about new games over quality games. I do think that, to your point, and to Christians, my quality still matters. But I do think that the balance has shifted in favor of quantity. Like, I think, a long time ago, when there was very few game releases per year. And you know, to consoles you can play games on then yes, quality was of the utmost importance, because you weren’t getting that many. But now when you have access to games on every device, every place, I think quantity plays a little bit more. And I think it’s more about balancing the two than it is about choosing which one is more important than ever, because in the mobile market quantity is definitely more important. But in the PC market quality is probably more important. So depends on their mix of games. Two

Jeff Cohen 1:07:22
things we’ve seen recently is IPS, becoming more like forever franchises and bring going a different console’s and the moats really, you know, deepening, right, like we’ve seen, look at Apex legends, right? Everyone thought it was a flash in the pan, and it’s continued to grow. I was reading, you know, he his transcript just earlier, it’s going to do $750 million next year. That’s massive. Like I remember the first year people thought it, you know, they said it was a 300 million, and then everyone was disappointed. And turns out, you know, two years later, it’s doubled that and it’s continuing to grow 20% year over year, that’s incredibly successful. franchise, so the moats around the most popular IP are deepening. So Paul, the corollary, I think I would give to your example of, you know, you kind of describe gaming as like, almost the VC model, where it’s like a power law kind of thing you get, you want to scatter 50 shots, and one of them will be your home run. I think that is true. In the sense of if you’re just trying to get a moderate hit, like you will get a fall guys or something like that, that will do well, you know, shark fin and then kind of go out. If I were trying to create a lasting brand and a lasting IP, I think I’d rather have like two or three deep shots that I spend 100 100 and $50 million on versus 100 things I spent $5 million on, because I really profile

Paul Dawalibi 1:08:50
they’re different though.

Jeff Cohen 1:08:52
Yeah, yeah, yeah. And if we’re talking about Tencent what they’re looking to do, if we’re if we’re talking about what would scare EA and Activision, it’s if Tencent takes a billion dollars and makes for, you know, Apex legends style games for the West, that scares EA and Activision, a hell of a lot more than if Tencent takes a billion dollars and makes, you know, a $205 million games. That doesn’t scare them at all, because yeah, a couple of them will make money and that strategy in and of itself might be less risky for Tencent, they actually might make more, you know, the ROI on that might actually be better. But that doesn’t scare Yay. What scares EA is if they’re if they try to create a franchise that could kill battlefield that could kill a kill Call of Duty.

Paul Dawalibi 1:09:39
Well, I Christian has a good point, sort of on your point here, Jeff, which is he says, but maybe one of those 60 games will stick and then they can try to sequel it or make it a live game like Apex right? That is a potential model schweers What have we ever seen that work with maybe with the scale like you get one hit, and then you double down on it right like

Jeff Cohen 1:10:00
It’s a fair, it’s definitely a fair pushback. And if you have the resources of 10 cent, you might be able to do that. Like, hey, throw a bunch of crap at the wall. Oh, that seems to be working. Okay, now move all the resources over there. Let’s build it. It that that could very well work. But I feel like in order to create a franchise and an IP, you kind of need to have that upfront. You need to build out that world build out the mechanics build out what it’s going to be the lore, it’s really hard to just create, like a plot like some, you know, three level platformer, and then oh, wow, it turns out it’s really popular. Like, let’s turn it into the next destiny. Like, I don’t think it really works that way. I don’t know I’m not a game developer, but it’s, it’s harder than you think. To create.