Tencent and ByteDance Are the Future of Gaming

If you thought that Amazon Twitch was the epicenter of game streaming, you haven’t been paying attention. ByteDance owns the GenZ consumer and Tencent is, well, dominant. Huya will buy DouYu, which gives Tencent a controlling share by a wide margin.

This all happened on October 12th, 2020. Chinese live-streaming game platform Huya announced today that it has agreed to acquire rival DouYu International Holdings in a deal that values DouYu at $6 billion. It will take ByteDance around four years to catch up in gaming but when it does, it will be a very serious gaming company.

In spite of recent efforts by Microsoft and Amazon to have a great future in gaming, it’s highly unlikely they will be able to compete with Tencent and ByteDance in the long run. Tencent, already China’s largest gaming company by revenue, will control two thirds of the new company of the merged Huya.

The merger brings together China’s two largest video game live-streaming platforms with a combined 300 million users. That is the vast majority of the 340 million users in China’s game live-streaming market estimated by Shanghai-based firm iResearch. China leads in both game streaming and E-commerce video streaming.

The new Huya would be dominant in game streaming in China and Asia. The merged entity would have a combined market share of more than 80% in the country, according to data from MobTech. Basically, Huya is China’s most popular online gaming site while DouYu is No. 2. Together they control over 80% of the Chinese market. Huya and DouYu reported monthly average users of 169M and 165M, respectively.

Before the announcement, Huya was valued at about US$5.8 billion on the New York Stock Exchange while Douyu was valued at about US$4.7 billion. Game streaming allows for more collaboration in gaming which is as important as Cloud gaming.

GenZ of course like to play collaborative games and interact with gaming influencers, in addition to following the evolution of E-sports. Eventually advertising in gaming will really take off and ByteDance is the company most likely to do that right.

ByteDance will dominate fields that intersect with the GenZ consumer, like viral apps, music, gaming and education. ByteDance is basically mandated by the Chinese State to become a gaming giant. Microsoft’s own pay to play entry into gaming cannot scale at that level. While Amazon Game Studios is mostly a failure so far, no matter the popularity of Twitch.

Tencent will integrate its game live streaming business under its “Penguin” arm with the combined businesses of Huya and DouYu after the merger for a total consideration of $500 million. Tencent is already the world’s largest gaming company by revenue, having developed and published some of the most lucrative mobile games in the world, including PUBG Mobile and Honour of Kings.

Tencent owns more than a third of both DouYu and Huya, with the majority of the voting power, but the merger further cements the tech giant’s leadership in e-sports and gaming.

Gaming is yet another field China is winning in over the United States. According to the SCMP, the merger also brings changes to the DouYu brand. Tencent’s live-streaming unit Penguin e-Sports will be assigned to DouYu to “deepen its business cooperation” with the company after the merger is completed.

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