China's online gaming weekly (Mar 25):Tencent announces solid pipeline at UP2016

Weekly changes

Netease’s WWJ and Tencent’s Naruto overtook Clash Royale in top 3 bygrossing. The Legend of the Condor Heroes from Perfect World has rampedup gradually since its early March launch and is now placed among the top15. Tencent (700 HK, HK$158.40, Outperform, TP: HK$196.00) saw itsnumber of top 100 grossing games increase to 30 from 29 last week, whereasNetEase Inc (NTES US, US$142.63, Outperform, TP: US$188.00)’s droppedfrom eight to seven.

UP2016: solid game pipeline and pan entertainment in progress

At UP2016, Tencent announced 12 new mobile games, three new clientbasedgames as well as its pan entertainment strategy. We expect morecollaborations between Tencent and leading PC game developers such asChangyou, Perfect World and Giant. About half of the newly announced titlesare backed by an IP, which remains the focus of its mobile game pipeline. Onthe other hand, Tencent continues to get major PC game licenses fromoverseas including Path of Exile and MapleStory 2. Pan entertainment wouldbe the key theme with more tie-ups with content platforms and providers.

More mobile collaborations with leading PC game developers. Followingits partnership with Kingsoft on a JX IP-backed mobile game, Tencent willcollaborate with Changyou on the new mobile TLBB, Perfect World’s ZulongStudio on mobile Zhuxian, and Giant Interactive on mobile Zhengtu. BothTLBB and Zhengtu are flagship client-based games with solid gamer bases.

IP continues to be the focus for mobile. Among the 12 newly announcedmobile games, about half are backed by IPs, including Tencent’s in-house PCgame IP Legend of Yulong, Konami’s Contra, Disney Cartoon, as well as thefour titles with Kingsoft (3888 HK, HK$18.26, Outperform, TP: HK$28.00),Changyou.com (CYOU US, US$18.91, Neutral, TP: US$16.00), Zulong andGiant.

Three new PC games of diverse genres. Tencent also announced threenew PC games: 1) the dark fantasy-themed Path of Exile licensed from NewZealand-based Grinding Gear Games, 2) MapleStory 2 licensed from KoreabasedNexon, and 3) a sci-fi shooting game with RPG Elements. Thecompany expects beta testing of Path of Exile to kick-off in May, and forMapleStory 2 to begin on 18 April.

Pan entertainment strategy in progress. Tencent formed a partnership withBilibili on comic content and signed licensing agreements with leadingJapanese comic publishers such as Shueisha, which publishes the popularmagazine JUMP+. Tencent Pictures announced a plan to produce 16 bigbudgetmovies, of which seven would potentially be released this year.

Gaming console on track. At UP2016, Tencent released its micro-gamingconsole miniStation along with the first batch of console games including TianTian Guo Ma Lu as well as several other games that support up to eightdevices. Tencent also introduced its drone, YING, at the game conference.