SHENZHEN, China/SHANGHAI (Reuters) – Tencent Holdings Ltd made its first big trip overseas with an adaptation of the blockbuster mobile game “the Honor of Kings” in the summer of 2017, when managers thought they had a sure-fire success on their hands.
FILE PHOTO: Young boys playing the game “the Glory of Kings” by Tencent, during an event in a shopping center in Handan, Hebei province, China August 5, 2018. Stringer/File Photo
The multi-player role-playing game, in which players hack and slash their way through the battle arenas, had 55 million daily active users in China and raking in about $145 million per month, making the company’s most successful game.
But errors in the development and marketing, compounded by a gap with Tencent, the U.S.-based Riot Games subsidiary, is the international version, called “Arena of Valor”, a flop in Europe and North America.
Tencent has already written, but the original plans for the “Arena of Valor” and disbanded the game of the marketing team for Europe and the United States, two sources company with direct knowledge of the matter said.
“In these markets, we are really just to let them live or die on its own course,” one source said, adding the game currently has only 100,000 daily active users in Europe and 150,000 in North America.
The sources are not authorized to speak to the media and declined to be identified.
The company has, since the renewed approach to the overseas markets, paying more attention to local needs and the running of partnerships, such as the one forged with Singapore-based Sea Ltd to handle marketing. It is also the expansion in desktop-and console-games.
But the sobering failure of the “Arena of Merit” raises questions about Tencent international savvy at a time when it is trying to expand, we chat messenger and other services outside of China.
“Tencent lacked the distribution channels and the experience of the user demographics, so that they do not know how to compete,” said IHS Markit games analyst Cui Chenyu.
Tencent declined to comment.
The company, which won a third of its $85.5 billion in revenue in the last quarter of video games, is eager to boost growth abroad as it struggles with problems in its home market.
Beijing has intensified efforts to regulate games the to addictive, while a revision of the regulatory authorities in China has hurt the industry, with a nine-month-long freeze in approvals for new games but just starting to thaw.
The problems came early for Tencent in the marketing plans for the “Arena of Valor”.
The internally developed games operation had for a long time a strained relationship with the US unit of Riot, of whom the employees view the Glory of Kings” as a knock-off of Riot’s “League of Legends” – the world’s most popular desktop-based game, the two Tencent sources, and a Riot source said.
These tensions grew as Tencent developed “Arena of Valor” and promoted it in Europe with the e-sport tournaments with gamers such as Spain Xpeke and France YellOwStaR, best known for their exploits in the “League of Legends” matches.
Incensed that his own brand was undermined, Riot, complained to a senior Tencent executive group, which resulted in a 2-month freeze in marketing for the game, the sources said. Riot was later granted the right to review all marketing plans, even the design of the posters, and veto the use of certain celebrity gamers.
“We had complaints before about the China market from the Riots, but nothing on this scale. Maybe they think that we had gone too far by taking the game abroad,” said the source.
For a game that is not on the ground, the promotional efforts were expensive, the sources said, noting that one of the tournaments cost $4.5 million and a top prize of a Tesla car. “We burned a lot of money,” a source said.
Other mistakes are more fundamental. A blunder of Tencent sources said, was for the replacement of the “Honour of Kings” characters, which are inspired by the Chinese mythology with figures from the European folklore and Western comic-book heroes such as Batman and Superman.
“In retrospect, it was pointless and it is actually now hurting us,” said a source, adding that the company should have more confidence in the appeal of the Chinese culture.
“Because the game is different in chinese and foreign markets, it is difficult for us to organize an international tournament of the game.”
Tencent also realized too late that the hardcore gamers in the West prefer a desktop-based games, and that many consumers in Europe and the United States had no access to 4G internet connections that are required for advanced mobile games, the sources added.
The popularity of “the Honor of Kings” also owes much to the huge community of players, connected by Tencent’s WeChat and QQ platforms. But efforts to replicate that on Facebook fell flat because there wasn’t enough PC gamers were on the platform, ” she said.
In contrast to the European efforts for the “Arena of Valor”, Tencent has outsourced the marketing and the operation of the game in South-east Asia to the Sea, who has made use of the large and relatively low-cost sales force to promote the game. Sea said in August last year the game had reached daily active users 14 million.
Tencent has also become more aware of the local sensitivities in the wake of the marketing misses for “Arena of Valor”. The made sure to gain the support of the Dubai government for a marketing event of PlayerUnknown the Battlefields Mobile and took care for the pairing of the desert depicted in the game with the environment, a source said. The event attracted 60 million views online and 5,000 participants.
To strengthen its presence in the West, Tencent is publishing more independently developed games, and has started with its WeGame X gaming platform, especially Chinese developed games in overseas markets.
FILE PHOTO: Logo of League of Legends (LOL) Mid-Season Invitational is to see in Taipei, Taiwan, May 18, 2019. REUTERS/Tyrone Siu/File Photo
The relations with the Riots, are also on a firmer footing, with sources saying that they have been working on a mobile version of the “League of Legends” for more than a year.
“At the end of the day, we are still one family,” one source said.
($1 = 6.9147 Chinese yuan)
Reporting by Pei Li and Brenda Goh; Editing by Jonathan Weber and Edwina Gibbs