Chinese company Tencent is the world’s largest video game economic player according to an analyst’s report newzoo. Tencent’s dominance has helped hamper ByteDance’s efforts to become a major player in the industry. The owner of TikTok has also been greatly weakened by Beijing’s restrictive policy against the industry. As a result, the firm decided to shut down one of its Shanghai-based game development studios.
Employees terminated or transferred to other ByteDance companies
ByteDance has just closed the video game development company 101 Studio, reported this June 18 the South China Morning Post. The 300 employees of this Shanghai-based studio have been laid off or transferred internally to Nuverse, the video game publishing arm of ByteDance.
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101 Studio was born from the acquisition of Mokun Technology, a development studio specializing in mobile games, by ByteDance three years ago. The acquisition was part of the company’s plan to diversify its business beyond TikTok’s short videos and its Chinese equivalent, Douyin. The company recalled its video game ambitions last May. In particular, she wants to allow TikTok users to play directly from the application, a feature currently in the test phase in Vietnam.
ByteDance has understood that mobile video games represent a tremendous opportunity. It is a market that is expected to generate $103.5 billion worldwide by the end of 2022 according to Newzoo. Despite its appetizing size, the video game market presents a real challenge. In this sector which weighs 44 billion dollars, the company is in direct competition with the two behemoths NetEase and Tencent.
Chinese policy has slowed down the video game sector
In addition to strong competition, ByteDance’s position in the Chinese market has been weakened by Beijing’s policy. The power had interrupted the release of new games for nine months since July 2021. In April, the government resumed the approval of new titles, but it remains extremely watchful over them.
Before these restrictions, 80-100 games were approved every month. As of June 2022, 60 games, solely developed in China, have been licensed. Even giants Tencent and NetEase are directly impacted by Beijing’s policy since none of their titles have been approved in this latest wave.
Faced with near-monopoly competition from Tencent, which takes advantage of the omnipresence of its WeChat messenger in China to direct users to its games, and the repression of Chinese power, ByteDance is reorienting its strategy. Former employees of 101 Studio have been transferred to Pico Studio to work on a virtual reality project, another sector in which the firm wants to position itself. Sectoral and geographical diversification since the company benefits from the strength of Moonton Technology, a studio that produces Mobile Legends, an extremely popular mobile game in Southeast Asian countries. ByteDance will have to be able to offer games that stand out from the rest of the industry to hope to stand up to the competition.