Tencent is estimated to lose billions in several investments surrounding its exclusive NBA streaming deal.
Tencent Holdings Ltd, one of China’s biggest firms, generally has its hands in a little bit of every pie including gaming and sports. However, it would seem like there are dog days ahead for the giant firm, following a simple tweet in support of protests in Hong Kong.
Back in 2018, Tencent successfully bagged a heavy and expensive deal worth $1.5 billion, which gave the company fully exclusive rights for streaming access to several games in the National Basketball Association (NBA) league. After many months of successfully showing these games and attracting several hundred million users, Tencent is now in a fix, after a tweet (later deleted) from Houston Rockets General Manager Daryl Morey, showed support for the long-running protests in Hong Kong.
All of a sudden, what was gearing up to be a great year for the Chinese multinational conglomerate, seems to be slowly falling apart. This is because as expected, buying these rights and keeping them up involved a lot of investment in both subscription fees and advertisements, all of which there’s a chance Tencent might lose, as it discontinues showing these games, at least until further notice.
Managing Director and Founder of Chinese consultancy firm China Skinny, Mark Tanner, recently summed up Tencent’s woes saying:
“One of China’s biggest companies, who does everything right politically, stands to lose billions due to the political issues outside of its control. We’ve seen how the company has toed the line with the gaming rules recently and I expect they will be even more careful with this one.”
2018 wasn’t at all a good year for the company and was severely hit due to restrictions in gaming. Last year, China created the Online Games Ethics Committee, a group that was saddled with the task of vetting all games to be released in the country, as it was thought that a lot of them were a little too violent and offensive, with the potential to encourage unruly behavior, addiction, and seriously dent productivity levels among Chinese youth.
In March, an overhaul of the process of approval began and eventually sparked a total suspension of all video game releases. What game makers did not envision at the time, was that the freeze would continue for 9 months. In December however, the Committee lifted the freeze and approved 80 games, but none of them were Tencent games. The company is estimated to have lost over $200 billion in value and share price also lost some 30%.
2019 hasn’t been that great for the company either. Tencent is expected to publish its quarterly results in a few days, and experts as well as investors, aren’t looking forward to it. Bloomberg reports that the social media giant peaked in April but shed some $86 billion in the months after. It all makes Tencent significantly lose to one of its main rivals Alibaba.
Generally, Chinese investors are far from excited and the news that the company is considering streaming the NBA matches again, might eventually boomerang.
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