"Apple tax" and "Android tax" double attack! Tencent makes a lot of money from games, but executives are not happy
2024-08-16
한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina
China Business News (Reporter Zhao Yiru)In the second quarter of this year, Tencent's domestic and international game revenues both grew by 9%, and the total revenue of small games grew by more than 30% year-on-year. However, Tencent's management is still "worried", because the business environment of the game market is still challenging, and the high share of the app store has put a burden on merchants.
Tencent headquarters building on the bank of the Huangpu River. (Photo provided by CNSPHOTO)
The gaming market still needs continuous innovation
In the second quarter of this year, Tencent's gaming revenue in its domestic market resumed growth, while gaming revenue in the international market achieved accelerated growth.
The financial report shows that Tencent's domestic game revenue in the second quarter of this year was 34.6 billion yuan, an increase of 9%. This was mainly due to the revenue growth of "Valorant" and the successful release of "Dungeon & Fighter: Origins". The growth rate of total game revenue in the domestic market exceeded the growth rate of revenue.
In the second quarter of this year, Tencent's international game revenue grew to RMB 13.9 billion, an increase of 9% both on a reported and fixed exchange rate basis. The growth rate of total international game revenue significantly exceeded the growth rate of revenue. The financial report stated that the growth was due to the strong performance of PUBG MOBILE and the increased popularity of Supercell's games.
Even though gaming revenue has grown, Tencent management remains "worried."
Tencent management said in the earnings call that the company's gaming business did perform strongly in the second quarter, but the extremely challenging business environment faced by the gaming industry in the past few years cannot be ignored. First, it is becoming increasingly difficult for the gaming industry to launch very successful new games, because games must have extremely high quality or differentiated gameplay to meet players' expectations; second, if the company wants its existing franchises to be sustainable, it must continue to provide users with innovative products.
Tencent management stressed that the gaming industry still has great potential, but is cyclical and could fall into a downturn when innovation or new supply is insufficient.
The "China Game Industry Report from January to June 2024" shows that the actual sales revenue of the domestic game market in the second quarter of this year was 74.629 billion yuan, a decrease of 2.125 billion yuan from the same period last year, a decrease of about 2.7%.
"From the perspective of the game market environment, on the one hand, market competition is becoming increasingly fierce, and the launch of new games requires continuous innovation. However, such innovation is not easy and requires a lot of R&D resources and time, as well as huge market risks. On the other hand, the tightening of regulatory policies has also put forward higher requirements for game companies." Jiang Han, a senior researcher at Pangu Think Tank, told China Business News, "As a leading company in the domestic game industry, Tencent has a huge user base and rich game product lines, and has accumulated rich experience and technical strength in game development, operation, and promotion. However, the concerns expressed by Tencent executives are not groundless, which requires Tencent to maintain a high degree of market sensitivity and innovation capabilities."
"The most unfriendly thing about the current gaming market environment to Tencent is that its 'cash ability' is becoming ineffective. Previously, Tencent carried out mergers and acquisitions and integration of gaming resources around the world through 'buying, buying and buying', but failed to successfully create new super hits. Its gaming performance is still mainly supported by 'Honor of Kings' and 'Game for Peace'. In addition, the impact from miHoYo starting with 'Genshin Impact' has made Tencent's 'throne' no longer stable." Internet analyst Zhang Shule told China Business News reporters.
Dissatisfied with the high share ratio
In this earnings call, Tencent management also responded to the 30% "Apple tax" issue. Previously, Apple was exposed to have forced WeChat to plug payment loopholes in order to impose a 30% Apple tax on the WeChat ecosystem, targeting the WeChat mini-games that have grown rapidly in recent years.
"I think there are some misunderstandings about the current situation, which is that we have not attempted to commercialize small games on iOS through in-app purchases (bypassing payment). If commercialization can be achieved, it will not only be in the interests of us and Apple, but also in the interests of game developers and users. But we hope to achieve this goal on economically sustainable and fair terms." Tencent management said.
Tencent said it hopes the discussion will yield positive results, as it will be a win-win for all three parties. If the discussion does not make progress, the status quo will continue; if the discussion makes progress, it will bring incremental benefits to Tencent, game developers, and Apple, and will definitely bring a better experience to Apple users.
“There is a natural tension between the gaming industry or digital content industry and the app stores, and the fundamental reason is that the app stores charge up to 30% for games and similar forms of digital content,” said a Tencent executive. “People in the gaming industry think this is a very heavy burden.”
In fact, this is not the first time that Tencent has expressed dissatisfaction with the excessively high revenue share ratio. In June this year, the operation team of Tencent's "Dungeon & Fighter: Origins" mobile game issued an announcement that due to the expiration of the contract, starting from June 20, "Dungeon & Fighter: Origins" mobile game will no longer be available on the app stores of some Android platforms.
Industry insiders believe that this is related to the 50% revenue share of Android channel vendors. It is reported that the "Hardcore Alliance" composed of domestic smartphone manufacturers such as OPPO, vivo, Coolpad, Lenovo, Huawei, and Meizu has agreed on a 5:5 revenue sharing ratio with game manufacturers.
"Faced with the 30% 'Apple tax', Tencent's boycott of profit sharing through the loophole of mini-games seems feasible, but it is just a drizzle for Tencent. At present, WeChat's support for mini-games is the general trend, and Tencent should not confront Apple head-on." Zhang Shule said that as for "Dungeon & Fighter: Origins" bypassing some Android channels, it is a way for current game companies to have great confidence in their own games. "Genshin Impact" has adopted such a strategy before. "But at present, the performance of "Dungeon & Fighter: Origins" is not enough to support it to completely bypass the Android channel. In the future, it may encounter difficulties in user growth."
