In one fell swoop, Chinese Internet giant Tencent suddenly owns 13% of the world’s games market. That’s thanks to its $10.2 billion acquisition of 84% stakes in Supercell, the Finnish company best known for its highly addictive and lucrative mobile game “Clash of Clans”. With Supercell in its armory, Tencent is poised to spread its domination of the mobile gaming business from China to the rest of the world, pitting itself against major publishers and the likes of Candy Crush maker King, which is now owned by Activision Blizzard.
Tencent might not be a familiar name in the West, but it holds a large portion of the Chinese market when it comes to Internet services, e-commerce, and games. Previously, it was most popular for its QQ and WeChat messaging services, the latter finding its way to other countries as well. But of late, it has been investing heavily in games as well, both mobile and PC, most of them of the online sort.
Most of those, however, have mostly been concentrated in the Chinese market, with a few exceptions. Like League of Legends, which is got through a 2011 acquisition of game maker Riot. With this Supercell buy, Tencent is cementing its position in the gaming market and is showing its aggressiveness to go global. More than half of its 2015 revenue came from games, amounting to $8.5 billion.
But getting into and staying in that nearly $100 billion business is no easy thing, especially when there are literally thousands of titles vying for attention and in-game purchases. Very few of those thousands, however, have been able to maintain their hold on the market and players for long periods of time. Which is where buying of well established game developers like Supercell comes in. It helps companies like Tencent to gain even more ground without having to risk reinventing the wheel and missing the mark in the process.
For its part, Supercell will have access to Tencent’s penetration in the Chinese market and its instant messaging technologies. The game maker is already working on trying to integrate its games with China’s most popular messaging services, so having direct access to WeChat and QQ will definitely be a boon.
The acquisition is still subject to regulatory approval but is expected to close by the end of the third quarter this year. Once it does, Supercell’s former owner Softbank will no longer own any shares in the company.