Tencent strengthens hand with Riot Games

Tencent Holdings Ltd's acquisition of the shares of US-based videogame maker Riot Games that it did not own puts Tencent in a "powerful global position by default," according to a gaming research director.

Riot Games announced on Dec 15 that Tencent had purchased the company's remaining 7 percent share. Terms of the deal were not disclosed. The Chinese Internet company bought a majority stake in California-based Riot Games in February 2011 for $231 million.

"At the time it was kind of shocking to see a Chinese gaming company spend so much money to buy part of a Western game developer," Lewis Ward, research manager of International Data Corp's gaming service wrote in an e-mail. "Since then, it's clearly proven to be a shrewd investment by Tencent. So buying the rest of the company is a confirmation of Riot's success and implies that an East-meets-West strategy can work under the right conditions."

"And part of that equation means letting the development team do what they think is right for the gaming community, and not trying to maximize near-term profits by pushing too hard on in-app purchases," Ward added.

Riot's videogame League of Legends is one of the world's highest-grossing online games. It is "arguably the most important PC game in recent years," wrote Ward.

Joost Van Dreunen, CEO and co-founder of SuperData, a New York-based provider of market research and intelligence on free-to-play and digital games, wrote in an e-mail: "Tencent is eagerly building out its global presence, and in that strategy it makes sense to own Riot outright. It's merely the final step, especially since they've held a majority ownership share since 2011.

"Its strategy is fairly straightforward," van Dreunen added. "[Tencent] expresses an interest to own 10 to 20 percent of a business and demands developers build in their hooks to make it compatible with the overall Tencent platform. This improves the success of a title, and allows Tencent to import valuable IP (intellectual property) into China."

Tencent generated nearly $2.2 billion from online games in the third quarter of this year, including more than $820 million from smartphone games, according to the company's third-quarter earnings report.

With revenue of $6.5 billion, China is the world's largest market for mobile games. Japan and the US occupy the second- and third-place slots, with $6.2 billion and $6 billion in revenue, respectively, according to data from Newzoo.

The overall global mobile-games market is forecast to reach $30.1 billion in 2015, the data showed.

jackfreifelder@chinadailyusa.com