Tencent’s eSports Domination | THE NEXT LEVEL 017

(Source: eSports Weekly)

TENCENT’S ESPORTS DOMINATION

My Take: Potentially the biggest news in eSports so far this year was last week’s controlling stake of Supercell by Chinese Gaming giant Tencent at a $10.2B valuation. Unless you’re involved in the Gaming and eSports space, Tencent is unheard of in the US — 50cent is definitely more popular.

Can Supercell produce a third massive game to go with Clash of Clans and Clash Royale? Did Tencent buy Supercell at it’s peak? Or was it reasonable based on other companies revenue multiples? Plenty of people have covered it already and this overview by Gaming analyst ZhugeEx is the best of what I’ve read. Ill just leave this here for perspective:

Even without Supercell, Tencent was already the world’s largest Gaming Publisher. That also doesn’t include Tencent’s other platforms and revenue streams like WeChat, QQ, Weibo and numerous others. Let’s focus on the Gaming aspects or we’ll be here all day.

Here’s how massive a Tencent/Supercell combination is:

(Source: Newzoo)

A combined Tencent/Supercell based on 2015 revenues would be almost double Activision-Blizzard (although Tencent has a stake in them) and almost triple EA.

The following stat could be one of the most impressive I’ve seen in the Gaming space:

(Source: eSports Daily)

Now that we’ve seen how big Tencent is I believe there are four main reasons that Tencent bought Supercell to grow even bigger:

  • Mobile: Already the #1 PC Gaming Publisher, Tencent is now the #1 Mobile Gaming Publisher as well.
  • Western Developer, Markets and Talent: Tencent has struggled to grow outside of China and particularly in mobile — Supercell now solves both. As Supercell looks to enter eSports, education and guidance from Riot’s team should prove useful.
  • China: Tencent has an enormous lead in China and will increase that even further. Additionally, Supercell has been making inroads into the Chinese Mobile gaming ecosystem with Clash Royale hitting #6 in May. If the Chinese market wasn’t already staggering — it’s now the top Gaming market in the world surpassing the US:
(Source: Newzoo)
  • eSports: Now this hasn’t been talked about. Yes the overall eSports revenues in the near term won’t even be a rounding error for Tencent but you have to look toward its future. Gamasutra interviewed a dozen Gaming analysts on the deal in a very long article. The total number of “eSports” mentions out of 2,000 words? Two. Time to do it myself.

Here are the various pieces that make up Tencent’s eSports infrastructure.

Supercell

  • Tencent Ownership: 84%
  • eSports Titles: Clash of Clans, Clash Royale

I’ve said a hundred times that I absolutely believe in Clash Royale as an eSport. Just this past week, Supercell unveiled the first step into eSports with their Tournaments feature:

(Photo: Supercell)

The other secret to Clash Royale is that it’s already a huge driver of media engagement. Why do you need Mobcrush or Twitch when you can control the platform directly in the game? This could be massive:

(Photo: Supercell)

From a pure scale perspective, Supercell is huge: 100M Daily Players across it’s four games — or 500,000 players per one Supercell employee. Tencent just Crushed Activision-Blizzard on mobile eSports — pun intended.

Riot Games

  • Tencent Ownership: 100%
  • eSports Titles: League of Legends

My Take: Riot isn’t the NFL of eSports — they’re the NFL, NBA, and FIFA of eSports. League of Legends is by far the biggest game that uses eSports to help drive it’s massive revenues — $1.6B in 2015 on a FREE game. It’s also unmatched in terms of scale: 67M Monthly Users, 27M Daily Users and ~8M playing at the same time during peak hours.

Activision-Blizzard

  • Tencent Ownership: 12.5%
  • eSports Titles: Call of Duty, Call of Duty Online, Starcraft II, Heroes of the Storm, Hearthstone, Overwatch, Candy Crush*

My Take: While Activision-Blizzard may seem like Tencent’s closest rival, Tencent actually owns a minority stake in the company (Will this last?). Call of Duty is the console eSports leader in the US and Tencent runs Call of Duty online in China. Laughing at Candy Crush as an eSport? That may not happen but there will be a casual title that will hit velocity in the competitive scene. Note that Blizzard’s games are published by Netease not Tencent in China.

Epic Games

  • Tencent Ownership: 40%
  • eSports Titles: Paragon, Unreal Tournament, Fortnite

My Take: Epic’s eSports titles could all be potential sleepers for Tencent. None of the three titles have been released however Unreal Tournament has long been a popular franchise.

Glu Mobile

  • Tencent Ownership: 21.5%
  • eSports Titles: WeFire, QuizUp, Kim Kardashian Hollywood*

My Take: Shooters are tough on mobile but Tencent has had success with WeFire in China and will be bringing it to the US. Similar to Candy Crush, QuizUp has great potential to be an “eSport” but potentially more engaging in a live environment — there’s already a TV show in the works. *Kim Kardashian!? Nope, just checking to see if you’re paying attention.

CJ Games/Netmarble

  • Tencent Ownership: 28%
  • eSports Titles: Marvel Future Fight, Casual Titles

My Take: CJ Games/Netmarble produce a variety of Mobile titles with Marvel Future Fight being the most significant.

Robot Entertainment

  • Tencent Ownership: Minority Stake
  • eSports Titles: Orcs Must Die Unchained

My Take: Orcs Must Die is a super fun game. The casual (starting to see a little pattern?) MOBA is great for people who’ve never played the genre before.

Miniclip

  • Tencent Ownership: Majority Stake
  • eSports Titles: 8-Ball Pool

My Take: Miniclip makes a ton of casual and mobile games — you may have even seen their title Agario in an episode of House of Cards. Some casual games may work as eSports but there’s another potential revenue stream: Real money wagering via companies like Skillz or Cashplay.

EA AND 2K

  • Tencent Ownership: None
  • eSports Titles: FIFA Online, NBA2K Online

My Take: Soccer and basketball have an enormous following in China. Speaking of popular Chinese sports, here’s a Freebie Rockstar Games: an updated version of 2006’s Table Tennis.

Pocket Gems

  • Tencent Ownership: 20%
  • eSports Titles: War Dragons

OTHER

We’re at 1,000 words and haven’t even begun to look at all the self published titles and other components of Tencent’s eSports domination:

  • Live Streaming: Investment in Douyu.tv, the Twitch of China. Have to have somewhere to watch all of these eSports
  • VR: Investment in Altspace VR and launch of miniStation
  • Console: Xbox, Playstation or Nintendo? No Tencent’s just going to make their TGP — Tencent Gaming Platform box
  • Live Events: No announcements similar to Alibaba’s World Cyber Games initiative but I’d be shocked if they don’t announce something big soon
  • UFC: I’m not sure yet about the eSports overlap — but something’s there if this turn out to be true

I’ve covered a lot on Tencent. While you may be focused on Tencent’s further ownership of the Chinese market, don’t underestimate their move into the West and increase their market share in eSports.

TL/DR: Tencent will continue to dominate the eSports ecosystem, move further into Western markets and more focus on Mobile.


E LEAGUE WEEK 5 REVIEW

(Source: eSports Daily)

[Note: Due to some Twitch viewership discrepancies I’m removing that]

My Take: We are now halfway through E LEAGUE’s debut season. If you remove the Week 2 and Week 3 outliers, you’re starting to see an average of ~130,000 18–49 viewers. Once Season 1 is complete Ill have a full review and analysis. Here’s the big one from this past week:

(Source: eSports Daily)

One other point: E LEAGUE also announced that tickets for the Season 1 Championship are now on sale. Here’s the interesting part: the $45 General and $150 VIP prices are the same as MLG’s Call of Duty Orlando Open. However E LEAGUE is two days with 4 teams and MLG is three days with twelve teams and amateur participation — along with the years of groundwork and million’s spent to establish Call of Duty as an eSport.

I’m curious if E LEAGUE is going to sell out considering that Free tickets are routinely available for the regular season like for this Friday.

ESPORTS DAILY’S HIGHLIGHTS

ESPORTS DAILY 1: EA eSports Strategy, Twitch Sues Bot Makers and Brand: Audi/Michelin

ESPORTS DAILY 2: Xbox eSports Arena, NJ eSports Betting and Brand: Zowie

ESPORTS DAILY 3: Tencent and Supercell, AMC Networks and Machinima and Brand: T-Mobile

ESPORTS DAILY 4: Formula E in Vegas, Moneyball in eSports and Brand: Honor

ESPORTS DAILY 5: 2K’s WWE eSports Potential, NBA2k on NBC and Brand: Twitch


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