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Tencent shutting down Penguin Esports is only the beginning

Video game giant Tencent recently announced that they will be shutting down their own streaming platform known as Penguin Esports after all attempts to consolidate their streaming holdings have been blocked.

As per CNN, the platform confirmed that all of its services will stop operating by June 7th. According to Penguin Esports, reasons such as changes in “business development strategy” have taken their toll to force the move by Tencent. Though to provide some sort of compensation to the users of the platform, Tencent also included in their announcement that they will give digital coupons that can be used in games such as League of Legends.

Tencent mergers keep getting blocked

In 2020, Tencent attempted to sell Penguin Esports to fellow Chinese live streaming service Douyu which leads the nation’s “contest” when it comes to streaming. Following the acquisition, a merger between Douyu and its main competitor is Huya, would see the Chinese streaming market largely consolidate under Tencent’s banner.

The merger that was priced at around $6 billion was blocked by China’s State Administration of Market Regulation in an attempt to stop Tencent from becoming too powerful in the current market. We discussed Tencent’s attempts to consolidate the industry almost two years ago, when it was painfully obvious they decided who gets to broadcast League of Legends and where. Several months after the initial merger plans got stalled, TJ Esports became news after getting flavored into broadcasting deals.

Bilibili the third largest player on the market is also getting slowly acquired by Tencent, putting the company in an awkward position of owning four large video sharing/streaming platforms with no ability to consolidate.

Out from competition

With ever increasing influence by the gov’t in how video games are treated, we are entering an era where Tencent is struggling to keep businesses afloat. Over the past few years, we’ve seen games getting banned, while play hours get limited and regulated by law.

Chinese authorities are also blocking Tencent game approvals since July of last year. One of the reasons for this is how video games could affect children’s health, especially those that spend more time playing than doing recreational activities. This all leads to Tencent recording their slowest financial year since 2004.

On the topic, Lightstream Research founder Mio Kato mentioned how this move by Tencent would be beneficial for them even if it means that one of their main platforms will be out of the competition.

“Intensified competition and the government’s tech crackdown has made it unviable to support Penguin while having two larger competitors who are also losing money. The industry looks like it needs to consolidate.”

However, its obvious the “industry” is not going to be allowed to consolidate. We shouldn’t be surprised if more companies get the “Penguin Esports treatment” this year as Tencent tries to navigate this “hard” times.

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