May 25, 2022

Tencent, the world’s largest video game company, has said it will close its Penguin Esports game streaming platform by June due to “changes in business strategy.”

Twitch-like Penguin Esports has never held significant market share in China, but Tencent already owns Douyu and Hua, the country’s two largest game streaming platforms, thanks to previous acquisitions. China’s market regulator said last July that the two services control more than 70% of China’s game streaming market.

The demise of Penguin Esports is likely due to some issues. The platform is facing increasing competition from Bilibili, which is known for its popular user-generated video streaming service, and Kuaishou, a short video app that is an enemy of Douyin (the Chinese version of TikTok).

Both Bilibili and Kuaishou, with current market capitalizations of $10 billion and $40 billion respectively, have invested heavily in live broadcasts and exclusive streaming rights. In addition, the ongoing freezing of gaming licenses in China has increased competition between platforms as hosts have no content to speak of.

Ultimately, due to the joint monopoly position between Douyu and Huya, Penguin Esports seems like an overkill at Tencent. And it should be remembered that Tencent also has stakes in both Bilibili and Kuaishou.

Loyal users will mourn the end of Penguin Esports, and some department employees may be fired. But overall, Tencent has little to lose by shutting down the platform.

Perhaps the biggest blow to Tencent will be Beijing’s attempt to block the proposed Douyu-Hua merger in August 2020. The decision came as no surprise amid the Chinese government’s swift moves to curb the internet giant’s power.

About a possible merger, the authorities said: “This leads to the elimination or restriction of competition.” “This is not conducive to fair market competition or the healthy and sustainable development of the online gaming and game streaming industry.”

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