Tencent’s Steven Ma: Why big acquisitions will be good for gamers

Tencent is the biggest game company in the world, and that is saying a lot considering rivals such as Microsoft, Sony, and Embracer Group have been acquiring so many game companies in an effort to become much bigger and more competitive.

Steven Ma, senior vice president of Tencent, has a global view of the game industry and he can explain why we’re seeing so many changes, like Take-Two’s acquisition of Zynga and Microsoft’s planned purchase of Activision Blizzard. Tencent has a global view because it owns stakes in companies such as Riot Games, Ubisoft, Activision Blizzard, Supercell, Dontnod Entertainment, and Bloober.

Tencent wants to deliver high-quality games, and those titles take $100 million to $300 million or more to make now. And smaller game studios need financial backing to make such games. It’s happening with mobile games too as triple-A quality comes to mobile. That’s why the acquisitions are happening, as it puts the necessary capital behind the games the studios are making. And it’s why this consolidation can be good for gamers, said Ma.

Ma noted that Tencent has moved more to the global stage of games since the last time we talked in 2019. Last year, 26% of Tencent’s revenues came from outside of China. That will accelerate in the future, and it’s why Ma is spending about 60% of his time looking outside of China. What’s he looking for? New innovations in gameplay, new game genres, and the kind of exciting games that will get gamers excited and drive the industry forward.

Tencent recently acquired Turtle Rock, maker of the Back 4 Blood and Left 4 Dead games, and it has opened new triple-A game studios in Montreal, Seattle, and Los Angeles. And while it is expanding rapidly, it has to be careful to focus on backing the right teams. We talked about all these things and more, like the metaverse and non-fungible tokens (NFTs).

Here’s an edited transcript of our interview.

GamesBeat: We last talked in 2019, in March. A long time ago. A lot of things have changed.

Steven Ma: 2019 seems like a long time ago, even if it’s just three years. The whole world changed.

GamesBeat: When we last talked you had 140 games in 200 countries with 200 million gamers playing them. What are some interesting milestones for you today?

Ma: Of course, COVID has changed the world. We’re seeing new markets emerge. We have many more players now around the world. I can’t talk about an exact number at this point, but it’s significantly bigger than the last time we talked. Second, for Tencent as a whole, we’re more focused on the global market compared to 2019. While most of our players and our revenue are still in China, if you look at last year, we had very large numbers of users outside China. Last year 26% of our revenue came from outside China. That’s a big milestone for us.

GamesBeat: In the last few years, have your own responsibilities changed or grown in any way?

Ma: Not really. But one thing that’s changed for me is that I spend more time focused on the global market now. Before, I only spent maybe 20% of my time looking overseas. I spent most of my time in China. Right now I’m spending more like 60% of my time focused on the global market. I hope I can get back to traveling again. It’s been almost two years since I last traveled to North America. But I just came back from a long trip in Europe last month. Hopefully, we’ll get back to traveling and face-to-face meetings soon.

GamesBeat: When people ask you how gaming has changed in the last few years, is there a simple way to explain it, to help people to understand how different everything is now?

Ma: From our view, it revolves around a few things. First, we’re mainly focused on the mobile game platforms. There, the user base is much bigger. We saw some very high-quality games come to mobile platforms, like Call of Duty Mobile and Genshin Impact. We’re seeing triple-A quality on mobile platforms. That’s been a change in the last few years.

Second, emerging markets are growing quickly. Markets like the middle east, like southeast Asia, like Latin America, they’re growing very quickly. It’s similar to what we saw in China in 2012 or 2013, when the mobile market shot up there. The same things are happening. That’s presenting new opportunities for the whole game industry.

We always talk a lot about game genres because we believe that core gameplay is the key to the industry. I’ve talked about that before. We don’t see as much of that big impact in the game industry, on the core gameplay side. We’re not seeing anything like when battle royale hit, with the arrival of PUBG and Fortnite. That hasn’t happened recently. We’re still looking for that new kind of gameplay. That’s a key for us, for the industry, and for gamers. That’s something we need to be looking for.

GamesBeat: So you believe that gamers are ready for some kind of change in gameplay?

Ma: Of course! That kind of innovation, new gameplay and new game genres, it’s not that easy. Maybe we see it once or twice every decade. It’s not easy. But as we look at what’s happening in the market, a lot of games have that potential. We can’t say we already know the formula for making it happen. But if you look at roguelike, at open-world sandbox, at survival and crafting, those kinds of keywords have made some games very successful. We believe the next powerful game genres should be some kind of combination of keywords within that group. It hasn’t happened yet, but I believe people are looking for it.

GamesBeat: You’ve made some announcements recently, like the new studios in Los Angeles and Seattle, and acquiring Turtle Rock. What kind of strategy should we see in moves like that?

Ma: Right now we believe we should make games for players worldwide. Our player numbers in China are very strong. Our numbers in emerging markets are very strong. Our numbers in mature markets like the United States and western Europe are very strong. More and more we see that people around the world play the same kinds of games and ask for the same kinds of quality. A change in strategy for us, first, is to try and make games for global players. We believe that players are the same wherever they are – in China, in Brazil, in North America.

Second, we have a very open mind about all platforms. The largest player audience is on mobile platforms, of course. But the PC market has the hardcore player community, the keyboard and mouse players. That’s the best place to bring new innovations, if you want to create good gameplay together with your community. Meanwhile, if you look at consoles, a big TV will always bring the best experience to players. We’re trying to make games that can use all the advantages of different platforms.

At the same time, we’ve seen some trends for new game genres, and some keywords that have potential. We believe that kind of innovation should combine with a baseline of very high quality. We’ll try to combine the quality of triple-A PC and console games with new gameplay. We believe that’s the key to creating the next big thing. If we want to do that, we need teams dedicated to that work in China and the west as well. That’s the strategy.

GamesBeat: Like a lot of other game companies right now, are you having a hard time finding the people you need to hire to make these games? Are you having to invest more in each game?

Ma: You’re right. Right now, if you want to make very high-quality games, the costs are getting higher and higher. I don’t believe that trend is going to stop. People are always asking for higher quality. But at the same time, that can slow down development and innovation. For creative work, people need to work face to face together. In my view, COVID might have caused a 30% loss of efficiency in a lot of game development. That’s a problem.

GamesBeat: How do you successfully communicate to developers that you want them to come and work for Tencent? It sounds like you might have to make more noise than you usually do.

Ma: The best way, always–we encourage the people who build games and we support their studios in making great games. We have a lot of resources. But the way to communicate with studios, I believe, is a more balanced view of game development. The team needs to want to make a successful game. If they believe in their direction, their gameplay, their idea, their concept, that’s the starting point for a successful game. We’re looking for teams and studios that believe in their ideas.

At the same time, we’ll try to use our resources to help them with what they can do. Sometimes your idea, your vision is not on the same level as your capabilities. That part we can help with, a lot. We have our central tech teams. We have a lot of resources. We have our network around the world with different studios that can help each other. They know what they can do. We also monitor the market very closely, and we’re very close to the community. Tencent, as a game company, we truly believe in being community-driven. We hear from our players. We can help our studios and development teams know more about what they should do.

The best way, the balanced way of game development is for the team to know what they want to do, what they can do, and what they should do. They need a balanced plan to make a great game. That’s what we try to communicate to developers. At the same time, we also push our studios, because we believe in a few things. One, as I always say, core gameplay is the key in this market. We encourage all our studios, all our developers, to look for the next big thing in new game genres, like what happened with League of Legends in MOBA or PUBG and Fortnite in battle royale.

As we talked about before, too, players want bigger and bigger games, and that drives costs higher. We believe the game as a service model is a good answer for the market. Right now we’re still at an early stage. Some games using this model have problems. But we believe it’s the future of the market. Part of that, again, is that we believe in being community-driven. We want all of our developers to have the ability to talk to their players, listen to their players, and have good interactions with their player community. That’s a key to success.

Finally, although new markets are still on the way up, their tastes are very much like those of mature markets. We believe that high-quality games for the mass market are key. We’ll always try to use our resources to support our developers in trying to make high-quality games for the mass market.

GamesBeat: What are the most interesting gaming trends to you right now?

Ma: I was talking about emerging markets before. If you look at the numbers from as far back as 2000, there were perhaps 100 million game players worldwide. The last time we talked in 2019, that number was 1.8 billion people playing games world. Today I’d say that number is closer to 2.5 billion people. That’s a big jump for the whole industry, and very good news. It means big things are going to change.

Also, as I said before, all the platforms are merging together. In 2016, 2017, 2018, those years, the mobile platforms and console platforms were two totally different worlds. The industry, the users, everything was different. But now we’re seeing those two markets merge together more and more.

GamesBeat: Square Enix sold off its western game studios and talked about focusing on blockchain games, NFTs, and other things they’re working on. How strategically do you look at things like NFTs and blockchain as areas to invest in?

Ma: It’s a big question. We view technology as a very important thing. What I always say internally is that for the game industry, the most important thing is gameplay. Then narrative, and then technology. Gameplay is the key to having fun in games. Narratives and stories are how you create a background, how you make people believe in a game. Technology is a game-changer for the industry as well, but we see a change like that every decade or two, perhaps, a big technology change. The last one we saw was the arrival of mobile platforms, smartphones, and before that it was probably 3D graphics. We’re close to looking for the new game-changing technology. But things like NFTs are very early. Today I don’t see what they can do as far as a real game-changer.

With new technology, if you want to make a big impact on the industry, usually the final result is something that leads to new gameplay. 3D graphics made a big impact on the industry because they led to new genres and new gameplay like first-person shooters. With NFTs today I can’t see the impact they’re having on gameplay yet, on the game experience. That hasn’t happened today. But who knows? We’re at a very early stage.

At the same time, I believe in things like VR and AR. That kind of technology could be an interesting area. We’ve put some resources into trying to help build innovation in those areas. I mentioned 3D graphics and mobile platforms as big advances. Those led to new experiences for players. Today we have some very exciting technology in VR. We can track the player’s movements, their hands and their eyes. See-through solutions will allow people to interact with their environment while they’re playing games. VR headsets will become smaller and lighter. We’re seeing 4K OLED displays make a real difference in the experience. That kind of new technology could happen in the next three to five years. We believe we should prepare for that, both around platforms and on the content side. That’s an interesting and exciting area for the industry.

GamesBeat: To me it seems like the metaverse might be a much bigger change than just NFTs. It’s not only changing games, how we play games, but also changing the platforms potentially, how those games get to players. Do you have any observations about the metaverse?

Ma: This is what I like about the game industry. If you look at the history of technology, usually games are the industry that is pushing technology to extremes, and at the same time toward a mass market, toward millions or billions of players. That speeds up the development of technology. For the metaverse, for the next generation of experiences on the internet, games will be an important part of what’s pushing that industry.

GamesBeat: One hard part about expanding worldwide is that geopolitics often has an effect around the world. Different regions have their problems. We have a war in Ukraine right now. How concerned are you about the way geopolitics affect the game industry?

Ma: Tencent is a global company. We have teams around the world. Our way of managing our business is more bottom-up. Decisions are made by our studios, by our local teams. Because we view emerging markets as quite important, we try to set up strong local teams in these areas. Those teams play an active role in all of our business. With local people making their own decisions, this way of managing our business makes it much easier to handle situations like what we see today.

At the same time, all the games we make are for global players. If you look at something like PUBG Mobile, you can’t just say, “That’s a Chinese game.” It’s a game made for players worldwide.

GamesBeat: Do you think that gamers are changing as well, in that they want to create a lot more of their own games? It seems like the rise of things like Roblox and Minecraft suggests that that’s a trend to pay attention to on a global level.

Ma: It’s an interesting trend. We also believe it’s an area of huge potential in the game industry. With NFTs, people always say that they’ll decentralize everything, decentralize control and governance. But I believe more in decentralizing capability to the players. If you look at what’s happened in the engine business, with things like Unreal, before those tools were only for professionals. Only very skilled people who had been in the industry for many years could use them. But we’ve seen more technology work its way down to indie developers. Now, if you have three or five people, you can develop games with really good graphics and gameplay, a full game. There was a time when you couldn’t have imagined that.

More and more, that kind of technology, combined with new platforms, will decentralize capabilities and development tools to players. If they have those kinds of capabilities, they’ll make their own things. People want to make things, to craft things. It’s why crafting is such a big part of so many game genres.

Recently I had a meeting with Tim Sweeney to talk about things like the metaverse. The question was, what’s the difference? I would say, we play games. We watch movies. But we’ll live in the metaverse. We’ll spend more time and try to do different kinds of things in the metaverse. That’s very different from current online games.

Really, the metaverse idea isn’t that new. My first online game, back in 1997 or 1998, was Ultima Online. It already had a persistent world. In that way, it was almost like the metaverse. But at that time the technology just wasn’t ready. Today, the technology could be here very soon. That’s why we can talk about the metaverse today.

GamesBeat: One technology I’m looking forward to is the ability to jump from one world to another world in real time without having to wait, without having to download another game. Do you think that experience is far away, or is that getting closer?

Ma: It could be here very quickly. Cloud gaming can definitely make that happen. If you put everything in the cloud, the user experience could allow very quick jumps from one game to another game, and everything would still look incredible.

Right now, though, cloud gaming has a few problems. The cost is still very high if you want to guarantee players will get a high-quality experience. We don’t have the right business model now to maintain that kind of experience. Second, a new technology should have a native kind of gameplay that’s built around that technology, that uses all the advantages of that technology. But right now all we’re talking about in cloud gaming is usually just streaming current PC, console, and mobile games. That’s one thing you can do with it, but it’s not the best thing to do with it. We need to have native gameplay enabled by cloud gaming.

GamesBeat: As a more general question, how important do you think gaming is to the world?

Ma: Internally we talk about ideas like how to define a game. Right now a game is something we play on PC, console, or mobile. You have a controller. You’re fighting or shooting or solving puzzles. But that’s not what makes up a game. Games use information technology to create cultural entertainment. That’s been happening ever since electronics entered the mass market 100 years ago. We had the movies, TV, radio, everything. We believe that new technology leads to continuing innovation.

As I was saying, games are very often the first mass-market application of new technology. When I talk to people working in the VR industry today and ask them about what stage of development we’re at right now, they compare it to the Atari 2600, back in the earliest days of video games in the 1970s. It was one of the first computing devices of any kind to reach the mass market. After four or five years, the IBM PC came to the market. Even today, if you look at all kinds of new technology, whether it’s the metaverse or cloud or VR, it all happened in the game industry first. The costs came down and people learned how to build new applications. Then it spread to other industries. Games are the main driver of technology.

You can look at a particular company, like Nvidia. Nvidia is very important to the AI industry today, and AI is important to all kinds of things. But Nvidia’s starting point was in games, making graphics cards for games. That’s a very good example.

GamesBeat: It’s interesting that some of the biggest companies in the world have come to gaming. There’s Tencent. Netflix is moving in. Las Vegas Sands is funding some studios. Blackstone. Lots of different large companies have noticed gaming. What do you think about some of the changes that might happen because of all the attention gaming is drawing?

Ma: All the big players in the internet, in the technology industries, they know that what’s important is the platform, the application, and the content. If you look at all these things together, games are important to all of them.

GamesBeat: When I see gamers react to some of the big deals that have happened in the industry, like Microsoft buying Activision Blizzard, or Sony buying Bungie, quite often it feels like they’re worried about the changes that are going to happen because of these deals. Do you have any way of reassuring them that this is going to be good for them, as change comes to everything?

Ma: One thing gamers should understand is the reason for these kinds of acquisitions is because the cost of development is getting bigger and bigger. Activision might have been a special case, but a lot of studio acquisitions happen because if you want to make great games, games that are innovative, games that have high quality, the development costs could be $100 million, $200 million, $300 million. Small studios can’t afford that risk. They need support from the big companies, the big platforms. That’s why these deals happen. I feel like the results are clear. We’ll get more games with high quality. That’s good for gamers.

Games are still an innovative industry, a creative industry. For Tencent, we’ve been lucky to catch some big opportunities. We picked up League of Legends in MOBA, and we picked up PUBG in battle royale. But these kinds of things all start from very small teams. PUBG’s developers came from DayZ, from H1Z1, very small projects made by small teams, or even just by individual people. We’ll see more and more of those kinds of opportunities. And as I was saying, technology is becoming more decentralized, reaching smaller teams and more people. In the future, indie developers will be more active in the industry.

Of course we see the trend toward big corporations creating more action in the market. But at the same time, because of platforms like YouTube and Twitch and Discord, we’re seeing players reach developers more and more directly. Developers can talk directly to their players. Game communities have never been stronger than they are today. One thing I always say to our development teams is to listen to their community, and use every channel possible to talk to them. Right now players have more influence on the industry and developers than they ever have. That’s a good opportunity for players.

GamesBeat: It feels like the right strategy for Tencent has always been to be ambitious in games, but also to encourage creativity as much as you can.

Ma: Of course. Creativity is always something we should focus on. We’re always looking for the next big things in gameplay, in game genres. We’re always trying to create new experiences. That’s the only way to make this business successful.