According to Reuters, the sources familiar with the matter stated that the company has redirected resources from the development of “Assassin’s Creed Jade,” a mobile game project with Ubisoft, to focus on “DreamStar,” its newly launched answer to NetEase’s hit game “Eggy Party.” This move suggests a departure from previous efforts to develop big-name Western franchises for mobile platforms, which often yield thin profit margins.
Tencent’s shift in strategy comes amid a changing landscape in the game industry, where niche products like “Eggy Party” and miHoYo’s “Genshin Impact” have gained traction, offering new gaming experiences developed in-house. Such games not only offer higher profit margins but also allow developers greater control over their intellectual property.
The decision to pivot away from big-budget foreign franchise games is driven by several factors, including the high costs associated with their development. These games typically incur significant royalty fees, platform fees, and marketing expenses, resulting in lower profitability.
Tencent’s Chief Strategy Officer, James Mitchell, highlighted the company’s focus on fewer, bigger-budget games during an earnings call, indicating a shift towards investing in proven gameplay success within niche markets. The company is also pushing for lower royalty fees in negotiations, reflecting a departure from its previous generosity in such matters.
Despite Tencent’s efforts to adapt its strategy, challenges persist. Recent setbacks, including the discontinuation of “Apex Legends Mobile” and the cancellation of a mobile game based on the “Nier” franchise, underscore the need for change.
To address these challenges, Tencent has launched its “Spring Bamboo Shoots Project,” aimed at incubating in-house games with novel gameplay. This initiative signals Tencent’s willingness to take more risks in game development and explore non-conventional game design.
However, even in-house projects are not immune to failure, as evidenced by the underperformance of “Undawn,” a zombie apocalypse shooting game endorsed by Hollywood star Will Smith.
Tencent’s strategic shift reflects broader changes in the game industry, with Western companies increasingly moving away from outsourcing mobile game development to Chinese firms. This shift poses new challenges for Tencent, particularly as it faces competition from Western companies like Microsoft’s Activision Blizzard.
