Tencent TCEHY 3.02% is already very dominant in mobile games, but a game-streaming giant under its control is a nice power-up—and could be a new way for the company to promote its own content.
Chinese game-streaming platforms Huya HUYA -3.91% and Douyu, equivalents of Amazon’s Twitch in China, agreed to merge in an all-stock deal Monday to create a $10 billion industry giant. Tencent, a substantial shareholder of both companies, will have a 67.5% voting right in the combined company. Huya and Douyu, which have more than 330 million monthly active users who watch top gamers play videogames on their platforms, together have more than 80% of China’s game-streaming market. There is likely some overlap between their user bases, but the combined company will without a doubt be the biggest game-streaming platform in China. Tencent will also fold its smaller platform, Penguin e-Sports, into the combined company.
A growing esports market clearly appeals to Tencent: Huya and Douyu’s revenue have both grown more than 40% in the first six months of 2020 from a year earlier, with the pandemic helping drive bored homebound people to their platforms. Combining Huya and Douyu will give the new company better bargaining power: a big part of their costs is incentives and bonuses for the best streamers.