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Analysis | Why Tencent spent US$1.3 billion to buy video gaming firm Leyou, but left it to languish
- Eight months after Tencent’s acquisition, Leyou is mired in cancelled projects and hobbled by an exodus of employees
- Tencent is said to be particularly interested in one Leyou investee company, American developer Certain Affinity
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When Tencent Holdings beat the likes of Sony to buy Hong Kong-listed video games company Leyou Technologies last year, the acquisition was expected to further boost the internet giant’s vast gaming empire.
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Tencent, which runs the world’s largest video gaming business by revenue and Chinese super app WeChat, completed its US$1.3 billion takeover of Leyou in December, which included Canadian subsidiary Digital Extremes – developer of hit online action game Warframe – and a deal with Amazon.com to create a massively multiplayer online role-playing game based on the epic fantasy novel and blockbuster film series The Lord of the Rings (LOTR).
Fast-forward to August and Amazon has cancelled its online game deal with Leyou because the US company could not come to terms with Tencent. What is more alarming is that Leyou has become a shadow of its former self, according to four people with knowledge of the matter who declined to be identified because the information is not public.
For Shenzhen-based Tencent, those count as tiny setbacks when compared with its outsize position in the global video gaming market, where it continues to “ruthlessly” snap up stakes in companies big and small at whatever the cost to dominate the industry, according to the people familiar.
Tencent declined to comment.
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