Tencent eyes more esports competitions in China (FT)
· Chinese esports & video game giant Tencent, plans to increase its investment in esports tournaments in China, supported by subsidies from local governments who are hoping to boost economic growth.
· Tencent backs two of the world’s most watched esports: PC game League of Legends (LoL) and the mobile equivalent Honour of Kings, and according to Chinese media is in talks to license US developer EA’s new battle royale ‘Apex Legends’.
· Tencent has recently invested in online streaming platforms such as Doyu and Huya, with the former having filed for a USD500m IPO in New York last month.
Analysis and Comments
·        China continues to be the most important market for both video games and esports.
· Since December 2015, online gamers in China have recorded a CAGR of 9.1% reaching 486m by June 2018. We believe there is still plenty of room for growth as the internet penetration is only 58%, with 588m people still offline.
·        Despite recent headwinds from Chinese regulations, I continue to consider Tencent to be the dominant player in video gaming and esports industry as it 1) owns the largest esport (LoL), 2) has significant holdings in China’s largest video game streaming websites, and 3) acquired 48% of Epic Games, the creator of Fortnite in 2012 (although Tencent’s position in Epic may have been slightly diluted since the acquisition).
·        Furthermore, Tencent’s WeGame video game platform appears to be positioning itself to compete and potentially disrupt Steam, one of the most valuable assets in the gaming industry.
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