Tencent reported a slight decline in game sales in the fourth quarter and noted that overall game revenue this quarter will be lower than the same period last year, when game sales rose sharply after the lifting of epidemic restrictions. Overseas use of Tencent business, Ka-leka.com includes recharge items for membership games.
Tencent founder and CEO Ma Huateng bluntly said that the company's video game division, which generated 180 billion yuan (25 billion U.S. dollars) in revenue last year, accounted for about 30% of the company's total revenue, needs to improve.
According to another source with direct knowledge of the situation, competitors have been developing new products, "which makes us feel that we have not accomplished anything," he told employees at the company's annual meeting in Shenzhen Stadium in January.
This month, Tencent also launched the "Spring Bamboo Shoots Plan", which aims to develop original games with innovative gameplay, with a budget of up to 300 million yuan (42 million U.S. dollars) for each game.
Although this is far less than the 1 billion yuan budget for large franchises, the move shows that Tencent is willing to take more risks in developing non-traditional games, the source said.
Some major setbacks only increase the urgency of change.
Last year, Electronic Arts (EA.O) opened a new label and cancelled the game "Apex Legends Mobile" developed by Tencent because executives of the U.S. company said the game did not meet the expected quality.
In December, Tencent stopped developing a mobile game based on the "NieR" franchise (9684.T) of Japanese manufacturer Square Enix, in part because the Chinese company struggled to find a compelling monetization model amid high development costs and franchise rights, sources said.
"Mobile game studios have realized that intellectual property is no longer the panacea to attract users as before," said Serkan Toto, founder of game consultancy Kantan Games.
Tencent has also suffered major failures in its in-house games. "Dawn of the Dead," a zombie apocalypse shooter backed by Hollywood star Will Smith, flopped despite a budget of nearly 1 billion yuan and the involvement of more than 300 developers, according to two sources.
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