The biggest gaming company in the world doesn’t have its own console, doesn’t make Call of Duty, and doesn’t even really make its own games.
Chinese investment company Tencent, which owns League of Legends developer Riot, is now the biggest company in the world in terms of game-related revenue, according to industry research firm Newzoo. This comes after Tencent experienced an annual growth rate of 45 percent last year. The company expects to report around $5.3 billion in game revenue for its last fiscal year during its upcoming March 19 financial filing. That will account for almost 8 percent of the $70.4 billion global gaming market. For comparison, estimates put Microsoft at $4.7 billion in gaming revenue over the same period.
Tencent, in addition to owning Riot, also has major investments in companies like Gears of War creator Epic and Call of Duty publisher Activision. Prior to making those purchases, the company established itself in China’s $13 billion gaming industry with popular PC releases through its QQ Games portal. QQ is part of Tencent’s hugely popular WeChat client that distributes digital titles in that market. WeChat has 300 million registered Chinese users. The report doesn’t include revenue that WeChat produces from non-gaming sources.
“Tencent has shown very consistent quarterly revenue growth for a few years in a row, due to its focus on online free-to-play games and, more recently, mobile games,” Newzoo chief executive Peter Warman said. “It is much less dependent on individual blockbuster releases than the traditional publishers and also on sales during the key Christmas holiday period. At the same time, new opportunities arise in China for Western IP as the market opens up slightly and mobile devices provide a new potential entry point ”
Since 2011, Tencent’s revenues have grown to compete with publisher Activision, Unlike the Call of Duty and Skylanders company, however, Tencent generates cash on a consistent basis. With the exception of monthly subscription revenue from Blizzard’s World of Warcraft massively multiplayer online role-playing game, Activision has to wait for its big games to hit the market and can experience huge dips in profit if it fails to release a new hit in a particular quarter. This has helped Tencent take the top spot.
Tencent is well positioned to take advantage of China’s ascending gaming market. It is a huge part of the PC segment, which accounted for more than $8.7 billion last year in that country. It is also a major distributor of mobile apps, which is China’s fastest growing gaming sector.
Of course, Tencent is not just focused on China. With its investments in Riot, Epic, and Activision, it has holdings in some of the biggest properties in the world. League of Legends made $624 million in revenue last year. That was second only to Tencent’s own CrossFire shooter, which generated $957 million. The company is also working with Activision on Call of Duty: Online for China, which is expected to hit later this year.
Newzoo has a full report on China available to download for free from its website.