Tencent, the world’s largest video game company, has announced that it will shut down its Penguin Esports game streaming platform by June due to “changes in business strategies”.
Twitch-like Penguin Esports has never achieved substantial market share in China, but Tencent already owns the country’s two largest game streaming platforms, Douyu and Huya, through previous acquisitions. Together, the two services controlled more than 70% of China’s game streaming market, China’s market regulator said last July.
The demise of Penguin Esports is likely due to a handful of challenges. The platform faces growing competition from Bilibili, known for its popular user-generated video streaming service, and Kuaishou, the short-form video app that’s arch-nemesis Douyin (the Chinese version of TikTok).
Bilibili and Kuaishou, which have a current market capitalization of $10 billion and $40 billion respectively, have invested heavily in live hosts and exclusive broadcast rights. On top of that, the ongoing gaming license freeze in China has intensified competition between platforms as hosts lack content to talk about.
Finally, the combined monopolistic position of Douyu and Huya makes Penguin Esports superfluous inside Tencent. And it should be remembered that Tencent also has a stake in Bilibili and Kuaishou.
Loyal users will mourn the end of Penguin Esports and some employees in the department may be fired. But overall, Tencent has little to lose by shutting down the platform.
Perhaps the biggest setback for Tencent is Beijing’s decision to block the merger between Douyu and Huya, which was proposed in August 2020. Amid sweeping actions by the Chinese government to curb the power of the giants of Internet, the decision did not come as a surprise.
“This has the effect of eliminating or restricting competition,” the authority said of the potential merger. “It is not conducive to fair competition in the market, nor to the healthy and sustainable development of the online gaming and game streaming industries.”