Tencent (HKG: 0700) will announce CY 2021 Q1 financial results on May 20th. Tencent is the #1 company by games revenue in the world and it has nearly 50% market share of China’s PC & mobile games market, according to Niko Partners. Tencent’s legacy titles continued to perform well in Q1 2021, based on data from Niko’s China Games Streaming Tracker and our market insights. Niko’s China Games Streaming Tracker is a proprietary online tool to track games on the largest game livestreaming platforms in China: Huya, DouYu and Bilibili. We track these three platforms daily and capture metrics for games and streamers, producing rankings in six categories: Hours, Streamers, Tips, Subscribers, Heat Index and Niko Index, which is our approximation of viewers.
League of Legends is Tencent’s flagship PC game in China, and it continued to grow in Q1. It was the #1 PC game in Niko’s China Games Streaming Tracker, with 10.56 million hours of gameplay streamed compared to 8.65 million hours in the prior quarter. League of Legends has returned to in person esports events in China and the World Championship finals are set to conclude in Shenzhen later this year. CrossFire, which is licensed from Smilegate, had 1.12 million hours streamed during Q1 and 1.21 million in the prior quarter. Dungeon Fighter Online, licensed from Nexon, declined after a weaker than expected 2020. A total of 1.01 million hours of gameplay were streamed in Q1, down from 1.38 million in the prior quarter. Tencent plans to launch Valorant (Riot Games) in 2021 to boost its PC offering, but we note that the title has not yet obtained a license.
Despite a tough comparison with Q1 2020, due to the impact of the stay-at-home period, Tencent’s mobile game revenue increased 3% YoY in Q1 2021 according to data from Sensor Tower. This was primarily driven by new content updates for legacy titles during the Lunar New Year period as well as the success of Call of Duty Mobile during its first full quarter. Tencent had 4 games in the top ten iOS games revenue chart in China during the quarter, with Honor of Kings and Peacekeeper Elite at #1 and #2. Honor of Kings was also the #1 mobile game in our Streaming Tracker with 9.48 million hours streamed compared to 7.45 million in Q4 2020. Peacekeeper Elite was the #2 mobile game in our Streaming Tracker. It witnessed a slight decline in total streaming hours, but the total number of viewers remained stable.
Call of Duty Mobile (CODM), which launched on December 25, 2020, was the #3 mobile game in our Streaming Tracker with 1.87 million hours streamed in Q1 2021. Total cumulative viewers during the quarter reached 274.7 million, about 1/3rd that of Peacekeeper Elite. CODM was the #2 downloaded iOS game in Q1 in China and #13 by revenue, according to Sensor Tower. According to Activision Blizzard, the games launch in China generated tens of millions of new players and its revenue in China during the quarter was on par with the rest of the world. New modes in the game and esports tournament have boosted player engagement, spend and viewership. The Call of Duty Mobile Masters Cup had a $450k prize pool, the largest of any prior CODM esports tournament globally.
Tencent released 8 new games in Q1 2021, of which The New World and Fairy Tail: Powers Awaken have been the most successful. Tencent has more than 80 games in its pipeline and approximately 1/3rd of them have been awarded a license (ISBN). Tencent also closed 35 game related deals in Q1 2021, compared to 31 during the whole of 2020. As of May 12, 2021, the company has closed more than 50 game related deals this year. We expect Honor of Kings to remain Tencent’s top game this year, especially as Tencent expands on the IP with two spin off games. Tencent continues to face strong competition from large tech companies such as ByteDance and Alibaba, as well as medium sized firms such as Lilith Games and MiHoYo but is in no immediate danger of losing its market leading position.
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