China, returns to invest in video games made in Europe

China

A flurry of investments. All in the made in Europe video game industry. From China, the digital giants are opening their portfolios again, after months of low profile following the squeeze ordered by President Xi Jinping. And European gaming startups are the first to collect the new wave of funding. Leading the ride, as always for years, is Tencent, the conglomerate par excellence of the digital economy of the Dragon, home of the super app Wechat and a leading name in the eastern world of gaming. A return to origins, in short, for the Shenzhen giant, which in recent months had gone as far as a nuclear fusion startup to place its chips.

There are five operations in Europe signed by Tencent between September and October. One a week, according to sportsgaming.win's observatory on investments from China in European startups, based on specialized databases such as Crunchbase, reports from funds such as Gp Bullhound, research, press articles and reader feedback after our first maps of the operations. And in gaming another Dragon giant like NetEase joins Tencent in the scouting of European talents.

Tencent's moves Gaming in Europe NetEase's run-up Content This content can also be viewed on the site it originates from.

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The moves of Tencent

In addition to the renewed commitment to Satispay, the Italian digital wallet that announced that it has achieved unicorn status (i.e. an evaluation by a billion euros), in recent months the giant led by Ma Huateng, also known as Pony Ma, has invested for the first time in Poland, in Gruby (a video game development startup), in Triternion, a small team that in the capital Slovenian Ljubljana deals with multi-player titles, and, above all, in Guillemot Brothers. That is in the holding of the family of the same name, which is the largest shareholder of the French gaming giant Ubisoft.

In September Tencent invested 300 million in the Guillemot safe (of which 200 million in the form of shares and 100 as a capital increase), which delivered 49.9% of the shares in Guillemot to the Shenzhen group Brothers and 5% of the voting rights. For Ubisoft founder and CEO, Yves Guillemot, "the alliance with Tencent strengthens Ubisoft's shareholding around its founders and ensures the company stability for long-term development." "This agreement aligns with our philosophy of investing alongside creative founders with the full confidence that they will lead their companies to new heights," said Tencent president Martin Lau.

In the Tencent deal it also put fresh finance on the table to repay the debts of the family that founded Ubisoft and gain more weight in the Assassin's Creed and Prince of Persia group, where it now accounts for 29.9%. Tencent, on the other hand, will be able to rise from its current 4.5% to 9.99%, without the possibility of selling the shares for five years (and with a family pre-emption right) and without being able to scale the company further for 8 years, without seats in council or veto rights.

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Gaming in Europe

Limits which, however, do not worry Tencent, which after the rectification pause has returned to expand abroad. In 2021, the authorities imposed severe restrictions on games in China and blocked licenses for new titles. Since July, the National Press and Publication Administration (Nppa) has turned off the green light, when usually between 80 and 100 new video games arrive on the market every month. And Tencent took the hit. In August it closed the second half of the year with a 3% drop in revenues (about 20 billion euros) compared to the same period of the previous year and a 56% drop in profits. 5,500 jobs jumped. For this, Reuters reports, the multinational has returned to look beyond the border. And particularly in Europe.

In the countries of the Union, the European Federation of Video Game Developers has calculated that there are 4,600 studios, which employ 74,000 people. On average, that's around 16 heads per company. Therefore small or very small companies, widespread above all in France (leading country in Europe in the sector), Germany and Sweden, which in 2020 had a turnover of 16.6 billion In Sweden and Finland the sector is starting to accelerate, in Poland, the ranks of employees are growing due to the excellent relationship between salaries and skills of the developers. For this there is a hunger for capital. Just what China is ready to offer. In June, Tencent acquired two video game development studios: Tequila Works, based in Madrid, and through its subsidiary Miniclip the Danish Sybo Games, with offices in Copenhagen.

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NetEase's run-up

Reuters cited a report from the Citi investment bank, according to which Tencent "will continue to make reasonable investments to acquire quality gaming content and talents and to deepen partnerships with top-level firms all over the world, in order to increase its investments and its presence in foreign markets ". In the same vein is NetEase, another Chinese digital giant, which in July invested in a Polish virtual reality studio, Something Random. While Xiaomi has renewed its support for the French startup Prophesee, which uses artificial intelligence systems to process the visualization of objects for autonomous systems, such as robots or driverless cars.

Overall, according to the sportsgaming observatory .win, 92 investment operations have been developed by Chinese funds or companies in 81 European startups and innovative companies. Taking the lion's share is Tencent, present in 43 of these investment businesses, alone or in tandem with others. While the most funded sector is that of gaming, where one in four companies among those recipients of these investments operates. It is no coincidence that the European Commission has decided to baptize an industrial alliance for virtual and augmented reality, a broad coalition, which today includes, among others, Ikea, Atos and Scania. If the Union wants a metaverse where you live with its rules and principles, it cannot repeat the mistake made with the cloud. In other words, to arrive late, leaving non-EU actors to hold the keys to technologies, primarily from the United States and China. And gaming is one of those crucial areas to make sure you aren't cut off from the future of virtual reality. A lesson that Tencent has learned well.