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Would a Tencent acquisition of Supercell benefit it or the mobile game industry?

Mobile Mavens discuss a potential giant
Would a Tencent acquisition of Supercell benefit it or the mobile game industry?
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There have been rumblings recently that Chinese behemoth Tencent is preparing to buy Softbank's 73% share in Supercell.

Tencent already owns League of Legends developer Riot Games, as well as strategic stakes in Netmarble, Miniclip, Glu Mobile and Pocket Gems.

Through its WeChat and QQ platforms, it also has enormous of influence in the Chinese mobile market.

But would the mooted deal benefit the Helsinki-based hit factory Supercell, or could a company like Tencent risk upsetting the balance at the studio?

Assuming the rumours are true, we asked our Mobile Mavens:

  • Would the deal be a good thing for Supercell?
  • Would it be a good thing for the global mobile games industry?
Devin Nambiar

Devin Nambiar

Head of Product and Partnered Development at Electronic Arts

While it's not confirmed whether Tencent will actually acquire Softbank's majority stake in Supercell, the rumours definitely have some basis in the fact that Tencent has been in talks with Supercell's founders.

But it still seems to be early in the process.

Things are complicated by the fact that Alibaba is also making a play, even though Alibaba owns a stake in Softbank and Jack Ma sits on Softbank's board.

M&A drama at its finest.

“Any acquisition that somehow messes with Supercell's "special sauce" can only be detrimental.”
Devin Nambiar

It's unclear whether an acquisition by Tencent would be good for Supercell, but one thing that is clear is that any acquisition that somehow messes with Supercell's special sauce can only be detrimental.

One of the reasons the Softbank strategic investment worked so well is because of how hands-off Softbank has been, allowing Supercell to keep humming along in Helsinki and release hit after hit, while also being allowed the freedom to learn from mistakes and kill early projects at will if the project doesn't show promise.

Would Tencent be the same type of partner?

No one really knows, but rumour is that some people at Supercell are wary of Tencent wanting to be more hands-on and involved. If this happens, the outcome would likely be bad.

Tencent's involvement hasn't damaged the performance of <em>League of Legends</em>
Tencent's involvement hasn't damaged the performance of League of Legends

That said, Tencent already has been on a buying spree, wholly owning Riot Games and having small stakes in Glu Mobile and Pocket Gems. League of Legends' success doesn't seem to be hampered by this fact, so Tencent probably knows not to mess with a winning formula.

From an industry perspective, consolidation in the mobile games market is now at our doorsteps. Tencent is already the largest games company in the world; they're a huge player in PC due to the Riot acquisition, and its stake in western-based developers Glu and Pocket Gems see it expanding its footprint.

A Supercell acquisition would make Tencent the unquestioned behemoth of the gaming industry.

Is this good? Well, here in China, Tecent and Netease already make up 18 of the 20 top grossing apps in the country, so China could actually be a microcosm for how the world could look like with Tencent as the dominant player.

“A Supercell acquisition would make Tencent the unquestioned behemoth of the gaming industry.”
Devin Nambiar

What this has looked like in China is that it's made it that much harder for smaller developers to keep up, with Tencent and Netease using their "fat stack" of chips to bully smaller players. 

In addition, Tencent is notoriously hard to work with as a partner, since it's often their way, or the highway.

Tencent and Netease are also not known for game design prowess as much as they are for knowing a winning formula and being able to replicate it with good development velocity and large amounts of marketing budget.

I'd be remiss not to mention that Tencent also has one of the best platforms in the world in WeChat/QQ on which to distribute content.

Thus, while some aspects of this new reality sound bleak, it's not necessarily that bad if large conglomerates can throw resources behind a project and back autonomously operating studios within the company to push high quality product out faster.

Plus, a platform like WeChat with a massive audience could actually help more people in the world enjoy high quality games - as long as Tencent doesn't meddle in the magic that their independently acquired studios are creating.

Harry Holmwood

Harry Holmwood

CEO at Marvelous Europe

I think it's a good thing - looking at the success of Tencent's other acquisitions, including Miniclip and Riot, both of which continue to thrive in the west while benefiting greatly from Tencent's skills and presence in the Chinese market.

“The next few years will see a lot of this kind of activity.”
Harry Holmwood

The next few years will see a lot of this kind of activity - whether eastern companies acquiring western ones, or vice versa - and it's great.

It demonstrates a coming together of these formerly disparate and inaccesible markets, which can only be good for everyone.

Right now, the perception remains that western games work in the west, Chinese ones in China, and Japanese ones in Japan.

How great will it be when we can create truly global games, perhaps tailored in each particular territory that access a truly global market?

Torulf Jernström

Torulf Jernström

CEO at Tribeflame

It would be quite ironic if the 300-year plan they talked about when Supercell was bought by Softbank turns out to change into a 3-year quick flip. To quote:

"SoftBank is all about the long term. In fact, I have never met anyone who thinks as long term as its founder, Masayoshi Son, does."

“This might lead to a quite a culture clash.”
Torulf Jernström

"When we first met, he told me he has a 300-year vision, and I thought he was joking until the following day when he ran me through what it actually looks like and it is indeed very real and extremely inspirational. " [Source]

It's hard to tell how it would work out. Supercell seems to have a company culture to always take the high road - they make innovative games, they have way less of the F2P cheap monetisation tricks, they seem to pay their taxes without crazy optimisation schemes, etc.

Tencent does not always have a consistent reputation in such matters, which might lead to a quite a culture clash.

On the other hand - as Harry and Devin pointed out - Tencent has been very hands off with their other western acquisitions, and would likely be that with Supercell too. If that's the case, it could work.

If they try to integrate the company into Tencent, it would be a complete disaster!

Oscar Clark

Oscar Clark

Chief Strategy Officer at Fundamentally Games

I've no idea whether this will happen or not - but I'm certain that as long as the ethos that made Supercell the superteam they are, they will continue to make amazingly successful content.

For me this is a bigger debate about who will dominate the wider games industry. Tencent is a smart company who clearly understand the role of mobile, MOBA and other great mass-market playing experiences.

Tencent's market awareness could benefit titles like <em>Clash Royale</em>
Tencent's market awareness could benefit titles like Clash Royale

Compare that with the Activision/King deal, where I would argue Activision was paying to play catch-up in the mobile space.

I don't quite agree with Harry and think we do have a global market in games, albeit dominated by 'quantity' in the East and 'quality' in the West - Supercell is one of the few companies who understands both!

If Tencent do get their hands on them good for them and could just be a great sign that this industry is growing up.

Jared Steffes

Jared Steffes

Co-founder at Muxy

It would be awesome to see Supercell grow into its own beast through smaller strategic investments.

I'd like to see them become an outlet for more than just games.