Tencent's Game For Peace Hits The Right Chord With Players
Zacks Investment Research | May 13, 2019 06:40AM ET
Tencent’s (OTC:TCEHY) decision to shut down its widely-popular mobile battle royale (BR) title PlayerUnknown’s Battlegrounds (PUBG) in China and replace it with a relatively unknown but government approved Game For Peace seem to have hit the right cord with the players.
Per Sensor Tower industry ’s growth of 18.6%.
Tencent’s Game Revenues Hurt by Regulation
Despite PUBG’s mobile version having a huge player base in China, Tencent failed to gain government approval for in-app microtransactions, apparently due to concerns over gaming addiction. Moreover, Tencent’s PC-version of PUBG is yet to receive approval.
Notably, in August 2018, the Chinese Education Ministry announced plans to limit the number of online games and the amount of time kids spend playing on electronic devices. The ministry cited the measures as part of government’s effort to reduce eye-related problems in kids and adolescents.
Per TechCrunch, Game For Peace is available only to users above the age of 16, which suggests the impact of stringent government regulations.
Gaming approval in China was stalled for the majority of 2018 that negatively impacted notable developers like Tencent, NetEase (NASDAQ:NTES) and Bilibili (NASDAQ:BILI) . Notably, Tencent and NetEase are among the biggest game distributors in China.
These factors along with the lack of monetization opportunity from PUBG in China hurt Tencent’s online game revenues, which declined 1% year over year to RMB24.2 billion in fourth-quarter 2018.
Top-Line Growth Relies on Robust Portfolio
The success of Game For Peace reflects strength in Tencent’s gaming portfolio. Apart from Krafton (previously known as Bluehole), the developer of PUBG, the company has a stake in Fortnite-developer Epic Games. Notably, Tencent is also waiting for government approval to launch Fortnite in China.
Moreover, although PUBG Mobile shutdown in China is a setback, its growing popularity in international markets presents growth opportunity for Tencent. Notably, PUBG was recognized as the Best Game of 2018 by Google (NASDAQ:GOOGL) Play.
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Additionally, Tencent in collaboration with Activision Blizzard (NASDAQ:ATVI) is set to launch free-to-play Call of Duty: Mobile later this year on both iOS and Android. Although the monetization strategy is yet to be unveiled, Call of Duty’s global popularity presents significant growth opportunity for the company in the long haul.
Tencent currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
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