Feb 8, 2023
Tencent Plans ‘Valorant’ Gaming League in Post-Crackdown Revival
(Bloomberg) -- Tencent Holdings Ltd. is planning to launch a Valorant esports league when the hit shooter title debuts in China this year, one of the strongest signs yet that the country’s internet giants are getting back to business after a two-year industry crackdown.
Tencent unit TJ Sports has held discussions with top Chinese esports players in recent days about setting up the competition, people familiar with the matter said. It could kick off a tournament over the summer at the earliest as Tencent rolls out the game domestically, one of the people said, asking to not be identified discussing private information.
Talks are in their initial stages and Tencent could push back its timeline, the people said. But a Valorant league will help reboot competitive online gaming in China after a two-year lull, when pandemic restrictions and Beijing’s clampdown on youth addiction chilled the world’s largest gaming arena.
Launched globally in 2020, Valorant has grown to become one of the most popular esports titles, vying for a multibillion-dollar market along with rival shooters like Blizzard’s Overwatch. Tencent won approval to roll out the title only in December, in what investors took as a sign that the government was preparing to relax its grip on the sector.
Tencent’s shares extended gains in late Hong Kong trading to climb as much as 1.8% before ending largely unchanged. Brokerages including Morgan Stanley have raised their price targets on Tencent in recent weeks, anticipating a recovery in growth as restrictions ease and efforts to sell video ads gain momentum.
“These are positive signs that China tech companies are back to business with regulatory headwinds largely behind,” said Marvin Chen, an analyst at Bloomberg Intelligence. “It is also in line with recent comments from policymakers that innovation is still in a prominent position for national development.”
A Tencent representative said in a message the company was making preparations related to Valorant and hadn’t confirmed a launch date for the game.
A Valorant extravaganza would add to Tencent’s roster of Chinese competitive leagues, spanning genres from battle arenas to racing and first-person shooters. Tencent set up TJ Sports with US subsidiary Riot Games Inc. in 2019 to helm League of Legends contests. Another unit runs tournaments based on Honor of Kings, Tencent’s long-running mobile cash-cow.
Valorant, along with the potential esports festivities, will help Tencent bolster a business crippled by stricter online content scrutiny. Growth for the WeChat operator has all but evaporated since 2021, when regulators began to establish curbs on everything from gaming time to undesirable content.
“We view Tencent’s launch of a gaming league as a positive and bodes well for both the company and the broader Chinese gaming sector in 2023 and beyond,” said Esme Pau, an analyst with Macquarie Capital Ltd. “With NPPA’s approvals for both domestic and imported games (such as Valorant) signaling higher transparency, Chinese game companies are better positioned to invest and launch marketing efforts around major franchises and hence drive higher gaming momentum and revenue.”
In December, the Chinese social media giant secured a green-light for a clutch of major releases including Valorant and Pokémon Unite, reinforcing hopes China is easing a two-year crackdown on Big Tech. Valorant in particular attracted attention because Beijing had in the past signaled its disapproval of violent shooting games with perceived Western cultural overtones. Tencent was forced to replace PUBG, for instance, with a less gory alternative named PeaceKeeper Elite that also came with political slogans.
The company has invested billions of dollars in talent agencies, streaming sites and tournament organizers to create the infrastructure necessary to turn pro gaming from a niche into an instrumental part of its growth strategy.
The League of Legends Pro League in China — operated by TJ — is the world’s largest esports league in terms of partnered teams and viewership. The Shanghai-based outfit has generated roughly $150 million in revenue in its first two years by selling media rights, tickets and merchandise.
Outside China, Riot itself organizes three Valorant international leagues with a collective 30 teams in places like Los Angeles, Seoul and Berlin.
Read more: Tencent Bets Billions on Gamers With More Fans Than NBA Stars
--With assistance from David Morris, John Cheng and Charlotte Yang.
(Updates with analyst’s comment from the sixth paragraph)
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