Tencent is leading negotiations to merge China’s biggest gaming streaming platforms Huya and Douyu into a single entity valued at $10 billion and controlled by Tencent, Bloomberg reported.
Why it matters: The merger would see Tencent become the controlling owner of a gaming streaming behemoth with more than 300 million users—the largest in the country.
- Tencent is the frontrunner in China’s gaming industry, but is increasingly challenged by Bytedance and Netease. The merger will help Tencent ward off its rivals, whilst enhancing the positions of the two gaming streaming platforms.
- The gaming industry is estimated to generate $3.4 billion in revenue this year.
Details: Huya and Douyu would keep their respective platforms and likely work closely with Tencent’s own e-sports site eGame.
- Huya’s shares surged 15% in NYSE’s pre-market trade, and Douyu’s rose 18%. Meanwhile, Tencent’s shares rose 2% in Hong Kong.
Context: Tencent already owns controlling stakes in Huya and Douyu, which are China’s biggest gaming streaming platforms. At the end of 2019, Douyu reportedly had 163.6 million monthly active users; in Q1 2020, Huya reported 151 million.
- In April 2020, Tencent purchased a controlling stake in Huya, buying 16.5 million Class B ordinary shares for a 37% stake, and now has voting power of at least 50.1%.
- Also a controlling shareholder in Douyu with 37.2%, Tencent appointed new directors of the board at both Douyu and Huya in March 2020.
- At the time, Douyu founder and CEO Chen Shaojie speculated about the possibility of a merger.
- The online game-streaming industry is estimated to have 340 million users in 2020, market research firm Iresearch sasid
- Tencent has its fingers in many pies, from gaming platforms, to developers, and publishers. As of April 2020, Tencent owned 10 of the top 20 games in China.
- Tencent’s reach extends internationally: In June 2020, Tencent bought a majority stake in Czech-based game designer Bohemia Interactive; a week earlier, it bought 20% of Japanese game company Marvelous.