In basic terms, digital game (or video game) consists of three types: mobile game, PC game and console game. Generally speaking, mobile game and free-to-play PC game are more popular in Asia, premium PC game is comparably more attractive in Europe and console game is more trendy in North America, according to the American games & interactive media intelligence SuperData’s 2017 Year In Review report.

Mobile Game Segment in Global Games Market

 

In console game sector, Sony, Nintendo and Microsoft are the leading console manufacturers and video game publishers, but they care less about PC and mobile games. They put more emphasis on their hardware manufactures and own software development. Though console game has been the traditional mainstream, mobile game generates around half of the global market value in 2018, according to the research by Newzoo. In addition, we can see a rapid growth of mobile games’ market share. Since western market is the dominant force of console game, we can predict the importance of emerging Asian market with preference of niche mobile and free-to-play PC game.

PC and mobile game sectors are highly driven by free-to-play titles. Activision Blizzard, Electronic Arts, NetEase, Take-Two Interactive, Nintendo and Tencent have been top publicly traded game companies in the world and they have rooted in or moved into mobile world. In this article we have selected Activation Blizzard and Tencent Games as representative video game developers and publishers in PC and mobile games sectors of digital game industry for benchmarking. Both of them have astonish performance and popular game titles in PC and mobile games’ revenue rank.

 

Activation Blizzard

 

Activision Blizzard, Inc. was founded through the merger of Activision and Vivendi Games in 2008. The latter was the then-owner of Blizzard Entertainment and the majority shareholder of Activision Blizzard. In 2013, Activision Blizzard bought itself back from this French media giant Vivendi and became independent.

Activision Blizzard currently has five operating units: Activision, Blizzard Entertainment, King Digital Entertainment, Major League Gaming, and Activision Blizzard Studios. The first three segments generate the majority of operating income of the company. According to the company’s Third Quarter 2018 Results, Activision, who has published Call of Duty, has generated 397 million USD in the third quarter of 2018, Blizzard Entertainment, who published World of Warcraft, Overwatch and Hearthstone, 635 million USD, and King Digital Entertainment, who published Candy Crush, 506 million USD. Activation and Blizzard Entertainment creates games for PC, mobile and console comprehensively, while King Digital Entertainment creates mobile games.

“In-game revenue is the lifeblood of the company these days, since its growth strategy is centered around driving player engagement with existing franchises as opposed to launching new ones every year to grow sales.”

—— John Ballard, The Motley Fool

 

Internationalization Strategy:

Activation Blizzard is based in California, US. Apart from its domestic offices, it has by now established widely distributed international offices in North America, Europe and Asia, including three corporate offices in Netherlands, UK and France, 19 overseas sales offices, 8 overseas studios as well as four manufacturing/distribution centers in UK, Germany, China and Netherlands. The locations covered have shown their emphasis on North American, European and Asian market. The company takes global strategy to maximize location advantages and manage different value chain activities in each country.

 

Entry Modes:

The foundation of Activision Blizzard was through several mergers and acquisitions over years. Afterwards, it realizes international growth by the methods of both internal and external expansions.

Through greenfield investment, it operates international offices in different continents. Through international cooperation over its entertainment franchises, it accelerate its global growth. For example, the company announced long-term strategic relationship with Tencent to release Call of Duty Online for Chinese market in 2012, so Tencent has exclusive license to operate this franchise in mainland China.

Additionally, the newly formed Consumer Products Group division of Activation Blizzard has joined Brand Licensing Europe to launch international partnership with retailers like UNIQLO and Primark, as reported by MarketWatch. In this way to realize international expansion of its hottest franchises.

 

Tencent

 

Founded in 2003, Tencent Games is owned by Tencent Interactive Entertainment, whose parent company is Chinese internet giant Tencent Holdings Ltd.

 

Internationalization Strategy:

Tencent Games’s expansion to overseas market is based on the company’s competitive and dominant position in its home country, consolidated by its grand social network Wechat and QQ. It’s necessary to implement internationalization as its corporate strategy to open wider market, generate more revenue and avoid the increasing restrictions in home country. The company used international strategy to operate activities in China and deliver its video games by digital distribution. In recent years it leans towards multidomestic or transnational strategy. It has acquired subsidiaries overseas and kept them independent. Viewing them as a whole, Tencent also disperse some of its value chain activities abroad and gains location advantages. Meanwhile, it has to response to Chinese local market and overseas market distinguishingly.

 

Entry Modes:

Difficulties in cultural adaption and difference regional video game preferences mentioned above resulted in the failure of exporting of Tencent’s self-developed games in the early years. The situation has been reversed since its establishment of new investment strategy. The current entry modes in its internationalization process rely on the financial support from the conglomerate Tencent. Acquisition and strategy alliance have help the company to have wide access to overseas gamers and learn technologies to develop its own games.

 

Acquisition

Overseas acquisitions remain the key way of foreign operation. Tencent has acquired majority stakes of Grinding Gear Games, Miniclip, Riot Games and Supercell. It also holds a minority shares in many other video game companies such as Activision Blizzard, Epic Games and Ubisoft. Though Tencent has whole or partial ownership of these video game companies, it allows its subsidiaries to operate independently. In this way, the key people in each company can continue lead their team to develop high-quality games. However, Tencent always keeps the right to release the Chinese version, especially mobile version.  

For instance, Tencent’s 2015 full acquisition of Riot Games gave it a strong position in gaming. Riot Games produced the top free-to-play PC game “League of Legends”. In the same year, Timi Studio Group of Tencent Games released mobile game “Honour of Kings”, which has been alleged as a copy “League of Legends”. However, it becomes Tencent’s top-grossing battle game in China and its overseas edition “Arena of Valor” has become gradually popular.

 

International strategy alliance

Tencent also creates opportunities through licensing agreements. For example, Tencent bought the right to develop and publish the mobile version of the hottest PC-based game “PlayerUnknown’s Battlegrounds” (PUBG) in 2017 from South Korean company Bluehole.

Comply with customer behaviors and market maturity, Chinese publishers usually make mobile games free to play but sell in-game items to monetize. “PUBG Mobile” has been distributed in IOS and Andriod app stores as free games in China as well as foreign markets. On contrast, gamers of the origin PC version PUBG have to pay to play. The risk is that Tencent has to seek regulatory approvals in China to start in-game item sales and get returns on investments. But the period for getting approval could be unexpectedly long due to changing political issues.

 

Conclusion

 

Tencent is not a traditional game company, instead, it’s a more like a venture capital, investing and building its video game empire quietly. Through investment and cooperation, it also develops and takes full use of its advantages in mobile games, which have attracted more new players to the video game world and brought prosperity to the industry.

Conversely, Activation Blizzard paid more attention to development and innovation for high quality games and improve player’s experience. One of the challenges that the company faces is the pressure caused by the trend of mobile games with snackable content and fast product replacement. How would it maintain the quality of its games and meanwhile attract new players? Now focusing on franchise expansion onto mobile has become one of its key growth drive.

Therefore, depending heavily on in-game revenue has become a similarity between these two companies.

Also, both of these two companies have started investment in the emerging e-sport industry. Let’s expect them to bring more excitement to fans around the world and provide fair opportunities to enjoy video games.