Kliuless? Gaming Industry ICYMI #3

Despite all the hype this week surrounding Call of Duty: Black Ops 4 Blackout, in my opinion Tencent's "Ring of Elysium is the most exciting battle royale launching this fall"

However, what excites me the most about RoE is not its dynamic weather system nor the fact that its free-to-play, but rather what it heralds for the future of Chinese games: innovation

I love this quote from a Chinese gaming executive: “Going overseas is just like swimming – when there’s a flood one day, you’ll realize it’s a survival skill"

That flood has finally arrived as China's freeze on new video game licenses may last another 4-6 months

"Amid the current uncertainty at home, Chinese game developers are ramping up international marketing. In the first half of the year overseas sales of China-developed titles reached US$4.6bn, up 16% year on year, outpacing the 5% y-o-y growth in the industry overall"

Aside from Tencent's RoE, this week NetEase announced that mobile PUBG clone Knives Out is heading to PlayStation 4, and China’s biggest anime video site Bilibili previewed two games on Steam

Over the past couple of years, China's gaming giants, Tencent and NetEase, have rapidly grown their development capabilities in the fight for mobile battle royale market share

After PUBG Steam Early Access began on PC in Mar-2017, NetEase’s mobile clones, Knives Out and Rules of Survival, launched 8 months later in Nov-2017

After that, Tencent’s two PUBG Mobile games only took 4 months to ship in Mar-2018, and quickly dethroned NetEase's titles partially due to their official licensed branding

As Chinese mobile gamers' tastes evolved to seek higher quality experiences, this year Tencent and NetEase both scrambled around the world to sign numerous deals with Western partners with well-known IPs:

China

What each of these collaborations signify is really an in-depth learning opportunity for both Tencent and NetEase to understand how to layer innovation on top of their already incredibly fast production processes

With each co-development project, they learn how to incrementally raise the quality bar of their games

I personally have already been impressed by NetEase's game design innovations in two of their mobile titles: Identity V and Inhuman Academy

However, I think the game with the greatest to-date harbinger potential for this incoming trend could be Tencent's Ring of Elysium, launching next week

Even if RoE is a flop, Chinese games will doggedly continue to penetrate Western markets because of the current state of competitive dynamics domestically: e.g., high market saturation, uncertain regulatory climate, Tencent's monopoly power (which discourages fragmentation and also blocks NetEase), etc.