The Shady Side Of Tencent

If someone asked you to name the world's biggest video game publisher, you might have a few guesses. Microsoft, Sony, and Nintendo are all power players with long histories and their own consoles to sell games. EA, Ubisoft, and Activision Blizzard all have tentpole franchises that sell millions of copies every year. Surely the world's biggest publisher must be one of these, right?

Not even close. The world's largest video game publisher, by a massive margin, is Tencent Games, a Chinese technology company that's a bit over 20 years old. The secret to Tencent's success lies in its vast investment portfolio, including League of Legends, Clash of Clans, and Fortnite, alongside its dominance of the Chinese gaming market.

However, the video game industry is a competitive environment, and it takes a lot to get to the top of that world. As such, Tencent Games has used some sketchy practices and aggressive tactics to get where it is today. Here is the shady side of Tencent.

All of the high-profile investments that Tencent has made over the last decade have increased scrutiny from various governments worldwide. In particular, the United States has approached some of the companies that Tencent has purchased a large stake in to probe the nature of these investments.

Both Riot Games and Epic Games received letters from the United States Committee on Foreign Investments that requested details on their security protocols for customers' personal data. These actions are a part of US government initiatives under the Trump administration to better understand how Chinese companies utilize data collected by software sold to Americans.

While these investigations into Tencent's gaming investments were unsettling, they stopped short of the more dramatic actions the US government took against other Tencent holdings. The Trump administration banned the popular messaging app WeChat, owned by Tencent, in September 2020, alongside Bytedance's popular social platform TikTok.  According to a letter from the White House, WeChat and TikTok had collected so much data from American citizens that it could allow companies to "conduct corporate espionage."

Despite Tencent being well-known for building near-exact copies of popular games, that has not stopped them from pursuing aggressive legal action against copies of their games. In 2020, the company won $6.4 million in a lawsuit against the makers of Crisis Action, which Tencent argued was a copy of their popular shooter CrossFire.

To get around the murky legal laws that allow Tencent to copy games and get away with it, their argument ignored the mechanics and visual elements the two games shared. Instead, Tencent's lawyers zeroed in on six maps featured in both games. Those six elements, the lawyers successfully argued, shared too many details and constituted plagiarism.

Tencent also won their suit against Moonton Technology and its game Mobile Legends, a copy of League of Legends. To prove their case this time, Tencent focused on the broader similarities between the two, including the name, the characters, and those characters' specific abilities.

Tencent was an early adopter of the microtransaction platform that is so prevalent in gaming today. In fact, microtransactions are one of the reasons that Tencent became the powerhouse company that it is today.

One of Tencent's first highly profitable ventures was the expansion of its instant messaging service, QQ. As QQ became a dominant presence in the Chinese market during the 2000s, it largely ignored digital advertising, which was prevalent in Western internet platforms at the time. Instead, it focused on microtransactions for games and digital goods. In 2007, microtransactions accounted for a significant portion of Tencent's revenues.

The dominance of microtransactions as a major part of Tencent's finances continues to this day. This model has helped the company fund the stealth investments that have made it the largest publisher in the world today. CrossFire, Tencent's Counter-Strike-influenced shooter, has been called a "pay-to-win" game due to the number of microtransactions that give players access to match-winning weapons.

In the Chinese legal code, there are three distinct ways that developers might go about stealing someone else's idea.

The first is code copying, where a company directly takes the coding work of another entity to sell as their own. This is illegal. The second is reskinning, where a game's core design elements carry over, but extensive work is done to modify the game's look to appear different. This is more complex and often decided on a case-by-case basis. The third is imitation, which is the most complicated. When a game company creates its own game that is simply inspired by the mechanics and gameplay of another game, it's harder to prove that they stole the idea, although the community often takes notice.

Tencent has a vast stable of games inspired by successful franchises, dating back to one of their first hits. QQ Speed, named for its platform on Tencent's QQ instant messaging service and also called Speed Drifters, borrowed liberally from Mario Kart and made little effort to hide it. More recently, Tencent announced a high-profile cyberpunk game, Syn. However, gamers were quick to notice that the game was very similar to the highly anticipated Cyberpunk 2077.

Occasionally, Tencent has found itself, or some of its subsidiaries, on the wrong side of the law. In 2019, Tencent purchased a Luxembourg-based consortium, which gave it a majority stake in Finnish game studio Supercell. Supercell has a well-known library of mobile games, including Clash of Clans and Clash Royale. 

While successful, Supercell has been involved in a legal dispute with Japanese game developer Gree for years. Gree claimed that Supercell had infringed on multiple patents that the company owned, related to fundamental game mechanics and server operations. Supercell denied the charges outright and unsuccessfully attempted to countersue Gree.

Supercell once again tried to have the case thrown out in 2020, but a Texas court found them guilty and ordered the developer to pay Gree $8.5 million in damages. While this amount was less than Gree had sought, the court also found the patent infringement willful, which means that the court could increase the amount as much as three times.

While Tencent cooperates with the Chinese government and conforms to the rules it lays forth, that does not mean that the two always see eye to eye. Tencent's relationship with its country's government is weird at best and adversarial at worst.

The Chinese government imposed the maximum fine possible on Tencent after it determined that the company's censorship efforts, while present, were not enough. While that fine wasn't enough to make much of a dent in Tencent's operations, the government has found other ways to get at the company's bottom line. In 2018, China tightened restrictions on video game licenses required to monetize new games in the country. Tencent's gaming revenue fell four percent during the first quarter that the license freeze was in place. When licensing finally resumed, the government approved none of Tencent's products during the first round.

Despite its adversarial relationship with its government, or perhaps because of it, Tencent went out of its way to produce a game honoring the Chinese president, Xi Jinping. Clap for Xi Jinping, a game in which players applaud the president's speech, went viral and caught attention worldwide.