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Gordon Young
Editor-in-chief at The Drum

Tencent turns to gaming subsidiaries in South East Asia to make up for revenue loss

The move by Tencent comes after the Chinese government froze the approval process for new games.

Singapore-based Sea has announced that its digital entertainment arm Garena, has signed an agreement with its parent company Tencent, to publish Tencent’s mobile and computer games in Indonesia, Taiwan, Thailand, the Philippines, Malaysia, and Singapore.

Garena already publishes several games from Tencent’s portfolio in its core markets, including Arena of Valor and League of Legends. The new agreement will see both companies work closely together to identify strategic opportunities to distribute and promote top titles from Tencent’s portfolio in the relevant markets for the next five years.

“Tencent is a global leader in the video games industry, with a portfolio that includes some of the world’s most popular and engaging titles,” said Forrest Li, chairman and group chief executive officer of Sea.

“This arrangement further solidifies our strategic partnership with Tencent to bring top quality IP to the large and growing games community in our region. Tencent has long been one of our most valued partners, and we are excited to work even more closely together to develop new opportunities in the relevant markets over the long run.”

Martin Lau, president of Tencent added: “Garena operates across some of the fastest-growing markets globally, and has a deep understanding of the dynamics in these regions. Our long-term partnership and collaborations with Garena on key titles have been successful, and we are glad to further deepen our strategic partnership through this arrangement. We look forward to closely working with Garena in offering users new and exciting titles in the years ahead.”

The move by Tencent to look to overseas markets for its gaming business comes after the Chinese government froze the approval process for new games. The regulatory changes have had a significant impact on Tencent, which reported its first profit decline in a decade and has lost more than $200bn in market value since the start of the year.

It announced its first restructuring in six years at the start of October, consolidating its business units combining online and mobile internet into one unit and will launch a new division to focus on business services and cloud computing.

As part of the restructuring, it cut the marketing budget of its gaming division and reduced the branding budgets for mature games into half and cutting spending to games not coming out until 2019, as well as for underperforming games.

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