"AI Infrastructure Investments Prompt Tencent and Amazon to Slim Down K-Game Businesses"

As global Big Tech companies ramp up fundraising for investments in artificial intelligence (AI) infrastructure, they are restructuring their investments and publishing business strategies in the Korean gaming market. They are moving away from low-margin businesses and simple equity investments, instead focusing on partnerships with exclusive intellectual property (IP).

Yonhap News

According to the gaming industry on September 1, Tencent of China has decided to sell 13.4% of the 18.1% stake it holds in Netmarble, a Korean game company, through its affiliate, Han River Investment. On September 21, the company will dispose of 11,153,240 ordinary shares through after-hours block trading. Bang Junhyuk, chairman of both Coway and Netmarble's boards, will acquire the shares for about 374 billion won. As a result, Tencent’s remaining stake in Netmarble will fall to around 4%, causing it to step down from its position as the second-largest shareholder.

Tencent’s asset streamlining moves are also apparent in Japan and France. According to Bloomberg, in June, Tencent sold about 20% of its shares in Marvelous, a Japanese listed game company known for IPs such as "Story of Seasons" and "Rune Factory," reducing its holding to less than 1%. In addition, Tencent is currently negotiating to sell off minority stakes in several other Japanese gaming companies. The company is also reported to have ended financial support for Dontnod, a French game developer famed for the "Life is Strange" series, and is even considering selling its stake.

However, even as Tencent restructures its global portfolio, it has maintained its stakes in Krafton (14.01%) and Shift Up (34.66%). Their flagship IPs—“PUBG Mobile” and “Goddess of Victory: Nikke” respectively—are distributed globally, including in China, through Tencent, with both companies sharing revenue. These IPs’ continued strong performance provides Tencent with clear grounds to sustain the partnerships.

Amazon Games, previously a dominant publisher in North America and Europe, is also parting ways with Korean game companies. Compared to Amazon’s core businesses such as Cloud and AI, game publishing is less profitable and its self-developed AAA games have underperformed. As a result, NC will end its publishing contract with Amazon Games earlier than planned and, starting February next year, will run “Throne and Liberty” (TL) in the West directly. Smilegate will also begin self-publishing the global service for “Lost Ark,” previously distributed via Amazon Games, starting early next year.

The reduction of game business activities by Tencent and Amazon Games is driven by competition to invest in AI infrastructure. Morgan Stanley recently estimated in a report that Tencent would pour about 41 trillion won this year, and as much as 82 trillion won by next year, into the advancement of its proprietary AI models and infrastructure. Amazon also raised its 2024 capital expenditures (CAPEX) forecast to 220 billion dollars, up from the previous 200 billion dollars, in its earnings announcement this July.

With Big Tech capital increasingly flowing towards AI, Korean gaming companies now face the task of establishing independence in global publishing and strengthening their IP competitiveness. A representative from one game company commented, “As the battle for dominance in AI sidelines game businesses and simple financial investments are being wound down, this presents domestic game developers with an opportunity to secure overseas user data themselves and to internalize global operational know-how, leading to structural improvements.”

This content was produced with the assistance of AI translation services.