Tencent said to be in talks for bigger cut of video game sales from mobile app stores
- The gaming and social media giant is seeking as much as 70 per cent of the sales generated from its games
Tencent Holdings is pressing China’s top smartphone vendors and app stores to boost the cut of revenue it gets from video games sold through their platforms, people familiar with the matter said, stepping up efforts to claw back profits as the company’s business slows.
The gaming and social media giant is seeking as much as 70 per cent of the sales generated from its video games, up from 50 per cent at present, said the people, who requested anonymity discussing private negotiations.
That would bring Tencent’s portion in line with the proportion shared with game publishers on other platforms, including Apple’s iOS store and Google Play, which each keep 30 per cent of revenue that comes from apps. Negotiations vary from platform to platform, and Tencent may not be asking as much from each app store operator, the people said.
Tencent is keen to shore up its bottom line as growth in China, the world’s second largest economy, decelerates, sapping consumer spending on entertainment and hurting advertising. The company’s gaming division – its largest – was battered in 2018 by a series of regulatory crackdowns. In May, Tencent reported the smallest increase in sales since going public in 2004.
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At the same time, Tencent has gained leverage in negotiations because the pipeline of new video games has shrunk, the result of Beijing’s clampdown on what it views as gaming addiction among youths. Fewer than 5,000 new games will be approved this year, versus more than 8,500 in 2017, according to estimates by Asia-focused gaming researcher Niko Partners.
Tencent “is likely to gain stronger bargaining power against its distribution channels”, Citigroup analysts led by Alicia Yap wrote in a research note this week.
