Tencent, China's ruler of the gaming and social networking industry, has consolidated fast-growing game live-streaming market after acquiring additional stake in Huya, a twitch-like service in the country.
Tencent has acquired Huya’s 16.5 million class B ordinary shares from the latter's parent company JOYY, a Nasdaq-listed Chinese company, for about 262.6 million US dollars.
The deal, made through Tencent subsidiary Linen Investment, has enabled Tencent a controlling stake in Huya with 50.1 percent voting power in the live-streaming platform.
The effect of the deal is far beyond just taking control of one live-streaming platform. Tencent now is the de facto leading player in the prominent industry with both controlling stake in Huya and its major rival Douyu, complemented by its own live streaming platform for game content, eGame, founded in 2016.
Huang Lingdong, who is previously a general manager at Tencent’s gaming division, Interactive Entertainment Group (IEG), will serve as a Chairman of the board of director of Huya.
Huya will continue to run independently post-deal.
"Tencent’s strategy is to own the entire games ecosystem by investing in companies, and then overseas companies it invested and executes its growth strategy through its subsidiaries without any Tencent branding," said Lisa Cosmas Hanson, managing director at game analytics company Niko Partners.
Prior to the deal, Tencent had already invested more than $1 billion in both Huya and Douyu, as well as other companies involved in the game live streaming industry.
Following the restructuring of its six business groups, Tencent has consolidated its game live streaming businesses into IEG in September last year. Focus on business involves online gaming and e-sports and reigning a slew of highly successful studios that produced hit mobile games including Honor of Kings and PUBG Mobile, IEG is one of its most profitable business groups out of its six groups.
Tencent treats online gaming as its core business, producing titles, sponsoring e-sport pro leagues as well as championship events for many years. Now its investment in both Douyu and Huya shows Tencent’s intention to hedge its big bets in live-streaming business, said Omdia, a technology research firm.
The company also takes a 'survival of the fittest' approach, supporting several different teams working on the similar game titles and then pick the team with the best outcome. Such was the case with its Chinese domestic versions of PUBG Mobile, where two competing studios named Timi and Light & Quantum, are now down to the latter.
On the competition among Huya, Douyu and the in-house eGame, "Tencent still win even if only one of them succeeds over the others. Meanwhile, the dual investment also help Tencent to achieve more synergy in its live-streaming business, limiting the competition between Douyu and Huya," said a senior analyst at Omdia.
Panda TV, another game-focused live streaming platform founded by Wang Sicong, flamboyant son of real estate mogul, Wanda's Wang Jianlin, went bankrupt last year after failing to raise sufficient fund to continue its operation. By the end of 2018, Panda TV ranked as high as third among game streaming platforms in terms of daily active users. Now its misery paved the way for Tencent to dominate in the sector.
Tencent has invested heavily in gaming worldwide, importing foreign online games titles to China, hosting gaming championship events while acquiring stakes in streaming platform that broadcast the events. One-third of the estimated 380 million global online audience for esports is in China, according to market research firm Newzoo.
In December 2019, Shanghai-based streaming company Bilibili reportedly paid USD113 million to exclusively stream for a three year period of LOL worlds championship. Tencent increased its stakes in Bilibili to 18% earlier this year, up from 12% in 2018 when the latter went public in New York Stock Exchange.
Tencent also incorporates live streaming of e-sport events directly into some of its mobile games, combining social networking with gaming, attracting new audience as well as returning players.
In China, Tencent has hosted a series of tournaments for League of Legends, developed by its portfolio company Riot Games. One event in May 2019 gathered a peak audience of 127.6 million online viewers, according to Esports Charts.
Tencent’s consolidation of game live streaming business could also help with its preparation for upcoming competition from other Chinese internet giants like Alibaba and ByteDance. Both of them enabled influencers to sell goods in live streamed shows, which are very popular in China right now.
"Integrating Douyu and Huya into Tencent’s broader gaming ecosystem could help it to win back Gen-Z users who are leaving WeChat for young-oriented platform like TikTok, Kuaishou, and Bilibili," said Leo Sun, an analyst with Motley Fool.