Produced| Tiger Sniff Pro Investment Research Group

Author | Xiaoyu Chen

According to Bloomberg News, on Thursday, US time, the Committee on Foreign Investment in the United States (CFIUS) sent a letter to gaming companies including Epic (Fortnite) and Riot (League of Legends) that have shares held by Tencent, requesting data security In the agreement, information about the personal data of US users is involved.

As soon as the news came out, Tencent Holdings (ADR) dived directly in late trading last night. As of the close, it fell 2.4% and opened again 1.33% today. Obviously the market was somewhat stimulated by the news, but it eventually closed down 0.38. %, the reaction is not very strong.

The reasons given by the Trump administration against Tencent this time are the same as in August. At that time, he issued two administrative orders in a row to ban WeChat’s exchange transactions in the United States. The reasons were all well-known “threats to national security.” .

One point worth recalling is that the executive order at that time also specifically pointed out that the ban did not involve Tencent’s gaming business. However, after more than a month, Trump once again performed a face-changing trick and turned his gun.

Following Tik Tok, why is the current US government having trouble with Tencent?

Which game companies does Tencent invest in?

Today, Tencent is already the world’s largest game publisher. The investment portfolio includes more than 300 companies. The scope of involvement is amazing. The following covers only the most important ones in Tencent’s investment in the game field. studio.

The 100% shareholding of Riot Games is the masterpiece “League of Legends”

(Picture source: company official website)

In 2011, Tencent purchased 93% of the shares in the leading company for US$400 million, and completed the acquisition of the remaining 7% of the shares at an unknown price four years later. In 2019 alone, “League of Legends” contributed more than $1.4 billion in revenue worldwide. Although it has been in operation for more than 10 years, it is still the most popular terminal game in the world. It also symbolizes Tencent’s extreme Strong operational capabilities. At the same time, Tencent is about to launch a mobile game version of “League of Legends”, which is bound to bring a new wave of enthusiasm.

Epic Games’ 40% shareholding masterpiece “Fortress Night”

(Picture source: company official website)

Maybe domestic users did not know about Epic before. This is related to the fact that “Fortress Night” is not a very popular product in the domestic market. However, after a recent bloody dispute with Apple, domestic netizens All of a sudden, I learned about this top-class gaming company overseas. In 2012, Tencent invested 320 million U.S. dollars in Epic, and Epic founder Tim Sweeney not only took this large sum of money, but also brought the concept of “service-oriented” games to overseas markets. “Free game content” is paired with paid value-added services as a revenue model, not the buyout game sales model that was still the absolute mainstream at that time.

The “Fortress Night” born under this concept is the most popular video game nowadays, spanning personal computers/mainframes/mobile terminals, sweeping the world and attracting countless golds, generating 2.4 billion US dollars in revenue in 2019 alone.

Blue Hole 11.5% holding representative work “PUBG”

(Picture source: company official website)

Obviously, Tencent is unlikely to let go of the “PUBG” production party Bluehole studio that has been on fire in recent years. It started investing in this South Korean studio in 2017. It is said that this 11.5% of the shares let Tencent paid about 500 million US dollars, and there are further rumors that Tencent is seeking a blue hole for full ownership. What’s interesting is that Tencent also holds shares in Blue Hole and Epic, in fact, it is very complex with its internal horse racing corporate culture, because “PUBG” and “Fortnite” are actually direct competitors, both of which are products with the theme of “Battle Royale”. .

Supercell’s 84.3% shareholding masterpiece “Clash of Clans”

(Picture source: company official website)

In 2016, Tencent invested US$8.6 billion in this Finnish mobile game developer, which was one of the largest acquisitions in game history. Considering that the core pillar of Tencent’s game business has always been mobile games, and “Clash of Clans” produced by Supercell is still the top ten strong product in the global annual revenue list even after 5 years of operation, this is obviously a very valuable product. investment.

Ubisoft’s 5% masterpieces “Assassin’s Creed”, “The Division”, etc.

(Picture source: company official website)

The French game company Ubisoft is one of the most important game companies in the industry today. Its products include well-known series such as “Assassin’s Creed” and “Far Cry”. The most interesting aspect of the cooperation between Tencent and Ubisoft is that the former not only helped the latter to get rid of malicious mergers and acquisitions from Vivendi, but also emphasized that Tencent will only be a “silent partner” and will not increase voting rights or It is equity, just to establish a further cooperative relationship with Ubisoft.

In addition to these companies, Tencent also holds Activision Blizzard in the United States (holding 5%); New Zealand studio Grinding Gear Games (holding 80%); Japanese studio Platinum Games (holding shares) Unknown) and many other game manufacturers.

It can be seen that Tencent has adopted a wide-spreading investment strategy. Investment is not limited to one place or a certain type of game. It also does not have too high requirements on the scale of the invested company. Some meat and vegetables mean.

Furthermore, another characteristic of Tencent’s overseas investment in the game business is that it is very willing to be a “hands-off shopkeeper”, and even rarely interferes with the holding company’s business. Previously, there were many news points that players were worried that Tencent’s participation would lead to the deterioration of game content, but in the end, the company came forward to clarify that Tencent had never had any impact on the company’s development. In addition, it was generous, which is why many game studios are quite generous. The reason for being willing to accept investment from Tencent.

How will Tencent be affected?

First of all, we need to be clear. At present, we are not concerned about the Trump administration’s next specific measures.Clearly, I don’t know what the authorities want to achieve, but from the point of view of the sending organization, this time it is actually “investment behavior” rather than “game business” itself. The next trend may be to ask questions. The proliferation of non-gaming companies that accept Tencent’s investment also requires these companies to confess how to handle user information. The Trump administration’s corresponding demand may be to pressure Tencent to sell its equity investment in the United States, or to prohibit it from further investing in US companies.

But in general, the pressure this time is not entirely directed at the game business itself, at least it does not seem to have much to do with operation and distribution. The next one Tencent received is probably also when it threatened to block WeChat. The same wording is extremely vague, deliberately confusing the interpretation of the administrative order in order to leave enough room for operation.

Moreover, it can be seen from the above that Tencent’s game investment business scope is very wide, and studios in various countries are involved, and the game industry is different from the chip industry. The United States does not master the core technology and exercises long-arm jurisdiction. Not too possible. In addition, it really wants to ask Tencent to shut down its business in the United States like threatening Tik Tok, that is, the public opinion pressure on the game suspension will be very large, so this round of sudden impact is likely to be smaller than the threat of bytedance. Much, and it is even more impossible to compare with Huawei.

Why is it always “national security”?

The Trump administration is most well-known for its obvious uncertainty. Changing the order of the day and night is commonplace and its preference for the “limit pressure” approach. And all this becomes more and more obvious as 2020 enters, especially administrative orders on the grounds of “national security” are frequently issued, and Jianfeng is directed at Chinese enterprises.

So what is the basic logic behind all this?

Actually, all actions of the Trump administration need to be viewed in the context of the general election. The basic purpose of any action is to serve re-election. U.S. business interests/national security are the secondary cause. It is easy to misjudge the entanglement of climate business logic. If you base your thinking on this premise, you can find that many actions of the Trump administration are easier to explain.

First of all, as we all know, Trump represents the conservative forces in the current American political spectrum. Therefore, a tough external line is the most effective for raising the approval rate. This is why Trump does not see positive returns in the market. Frequent use of retaliatory tariffs on Canadian aluminum, forcing Tik Tok to sell businesses and other administrative measures forcibly pressurize, even if this is actually quite inconsistent with the neoliberalism that the United States has always pursued, and may even undermine basic principles.

Behind this kind of isolationism is actually the votes. However, when the fight against the epidemic is unfavorable, the domestic riots continue, and the election situation is urgent, these tough external attitudes are Trump’s most effective tools for stimulating public opinion.

This is also why we can see that despite the previous authorities’ rhetoric, Tik Tok has been less and less pressured over time, because this is actually helping to solve Trump’s urgent need Not big, which led to his gradual decrease in interest in this matter and his attitude gradually softened. After all, for Trump, who is overly pragmatic and never loses everything, if this thing does not produce benefits, he is no longer willing to invest too much energy.

Anyway, as the saying goes, there are dates and no dates are three shots. Of course, dates are best.

If it’s useless, let’s not talk about the old sayings. If you don’t have shoes, you won’t be afraid of people wearing shoes.

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