Tencent’s acquisition of Sumo was one of the most significant deals in the gaming industry. The acquisition gave Tencent a major foothold in the competitive mobile gaming world, and its implications are still being felt today. Through an analysis of the deal, we can better understand Tencent’s purchase’s impact on the mobile game industry.
First and foremost, it is important to note that Tencent’s purchase was unprecedented. Sumo’s founders held out for a higher price than any other gaming company had ever received even though they faced competition from giants like Activision Blizzard, Electronic Arts, and Nexon. As a result, Tencent set a new precedent in valuation for mobile game companies and demonstrated their willingness to pay top dollar for popular developers. This has since become an expectation among investors in mobile gaming startups, who now anticipate valuations at least as high as what Sumo received from Tencent.
Furthermore, the purchase has highlighted the importance of partnerships for mobile game developers. Sumo’s success was largely due to their ability to build strong relationships with hardware partners such as Apple and Google and software providers like Unity and Unreal Engine. These partnerships allowed Sumo to create games that were widely accessible across multiple platforms with minimal disruption or downtime due to hardware changes or updates from vendors. The success of these partnerships also drew attention to developing iOS games specifically; many smaller companies have begun shifting their focus towards creating apps exclusively on Apple devices so they can take advantage of their “ecosystem lock-in” strategy which incentivizes users to stay within the Apple-approved ecosystem through continuity features such as Airplay or Handoff.
Tencent Buys up British Video Game Developer Sumo
Tencent is a Chinese technology giant that has been around since 1998, and it’s well established in the business and technology world. Recently, Tencent has made headlines with their purchase of Sumo, a British video game developer. This acquisition is certain to significantly impact the industry, and it’s a prime example of how Tencent is changing the landscape of the video game industry.
Let’s take a look at Tencent’s history and examine how this acquisition could impact the gaming innovation:
Overview of Tencent
Tencent Holdings Limited is a Chinese investment holding company whose subsidiaries provide various Internet-related services, products and entertainment in China. The company was founded in November 1998 and its headquarters is in Shenzhen, Guangdong, China. Tencent’s services allow users to access music, social networks, shopping tools, web portals and game platforms.
In 2003, Tencent purchased Sumo. Sumo was a leading provider of Internet advertising technology that allowed customers to effectively optimise the performance of their online ad campaigns. With the purchase of Sumo, Tencent increased its portfolio of online services and consolidated its position as one of the biggest global internet companies.
Tencent’s portfolio was further enhanced with additional purchases of platforms and services such as:
- QQ SoSo (2006);
- Ku6 (2006);
- eBuddy (2009); and
- Sogou (2013).
The firm has since diversified further into areas such as digital payment systems; messaging apps; financial technology; film production; cloud storage solutions; telecommunications products; artificial intelligence technologies; sports programming; vehicle engineering capabilities; mobile gaming platforms; music streaming apps; manga comic distribution services and venture capital investments.
Tencent’s Acquisitions
Since its founding in 1998, Tencent has grown to become one of China’s most successful and influential corporations. Its businesses encompass a wide range of industries from internet services, cloud computing, artificial intelligence, to gaming and entertainment media. During the past two decades, Tencent has made numerous acquisitions to strategically expand its services and offerings.
Some of Tencent’s major acquisitions include:
- online video streaming platform Kuaishou in 2021;
- electric vehicle startup Nio Inc in 2020; and
- gaming company Riot Games back in 2011.
A few more prominent purchases include:
- the social media platform WeChat for 300 million dollars in 2011;
- Candy Crush developer King for 5.9 billion dollars in 2016;
- live streaming platform Douyu for 6.2 billion dollars;
- music streaming service Kuwo Music for a reported 140 million dollars; and
- Sumo Group Plc., an independent producer / publisher of video game content and services specialising in quality games, was acquired at an equity value of approximately ₤ 1320 million pounds (approximately over 19 billion RMB).
Additionally, Tencent also spent an estimated $21 billion storing up strategic stakes into more than 40 companies such as Alibaba Group Holding Ltd., ByteDance Ltd., Didi Chuxing Technology Co., Electronic Arts Inc., JD.com Inc., NetEase Inc., Snapchat’s parent Snap Inc., Tesla Inc., WPP Plc, Xiaomi Corp., etc.
Sumo’s History
Sumo Digital is a British video game developer founded in 2003. They are best known for their work on the “Little Big Planet” series and the “Sonic racing series”. Over the years, the company has also worked on blockbuster games such as “Forza Horizon 4” and “Injustice 2”.
In 2021, Tencent, the Chinese tech giant, purchased a majority stake in Sumo for an undisclosed sum. Let’s look at Sumo’s history and how this acquisition could impact the gaming industry.
Overview of Sumo
Sumo Group is an international video game development and publishing company headquartered in Sheffield, South Yorkshire, England with offices in Nottingham, London, Tokyo and Los Angeles. The company was founded as Touchfish in 2003 by Mathew Shell and Richard Iggo. In December 2006 Touchfish became Sumo Digital after a management buyout.
Sumo Digital released titles like Sonic & Sega All-Stars Racing (2010), Forza Motorsport 7 (2017) and Crackdown 3 (2019). In November 2020 Tencent Holdings Ltd announced that they had acquired a majority stake in the Sumo Group. This deal makes Tencent one of the largest game publishers to have absorbed a European studio.
The new venture will allow Sumo Digital to leverage its existing technology and expertise to help play an even bigger role within the industry – nationally and internationally – furthering its status as a leading developer of world-class games for every platform around the globe. In addition, with this acquisition, Tencent can strengthen its current roster of real-time multiplayer titles such as CrossfireX on Xbox One, PUBG Network on PC, Ring Of Elysium on Steam PC and mobile titles such as Arena Of Valor globally or ‘Honor Of Kings’ in China.
Sumo’s Successes
Sumo has been a leader in the mobile gaming market for many years. In 2016, the F2P cumulative revenue for Sumo exceeded $1 billion, placing it among the world’s top grossing mobile games of all time. From Puzzle & Dragons and Clash of Clans to Candy Crush Saga and Emojily Story, Sumo quickly gained recognition for its genre-inventing titles.
In 2017, Sumo was acquired by Tencent for an estimated $8.6 billion making it one of the largest acquisitions in history. The purchase made Tencent the world’s largest Internet and technology company and one of China’s biggest mobile gaming companies. Following the acquisition, Sumo continued to reign supreme in China’s mobile gaming market with multiple hit titles that continued to be successful at home and abroad.
Not only did Sumo continue their long track record of creating award-winning games but they also championed increased regulation of in-app purchases to protect underage players from engaging in too much spending or addictive behaviour within their games. This move vastly extended their customer base as parents felt more comfortable allowing their children to play knowing safety regulations and parental controls were being implemented.
Impact of Tencent’s Purchase of Sumo
Tencent’s recent purchase of the British video game developer Sumo represents a major milestone in the gaming industry. Not only does it signify the entrance of one of China’s largest tech companies into the UK, it also allows Tencent to extend its reach and influence into the highly competitive video game market.
In this article, we’ll explore the implications of Tencent’s purchase of Sumo and how it could affect the gaming ecosystem.
Positive Impacts
In April 2018, China’s largest technology company, Tencent Holdings, facilitated the purchase of Sumo, an American laboratory and game development NGO. This purchase will bring major positive impacts to both Tencent and Sumo.
For Tencent, the acquisition gives the company access to Sumo’s highly skilled and experienced workers. In addition, it allows Tencent to expand its influence into the western market. The purchase also provides enormous potential programming talent for future projects. With its vast financial resources ,Tencent can provide a wealth of funds for Sumo to grow its operations and expand product offerings in targeted markets.
This acquisition brings much-needed stability and security regarding funding and resources for Sumo. Furthermore, with Tencent’s large user base, the company has brought visibility to the NGO’s products, allowing them to reach new audiences worldwide. Additionally, having access to Tencent’s advanced technology helps accelerate development processes while reducing overhead costs due to sharing research & development expenses between both organisations. Finally, by partnering up with a major tech giant like Tencent ,Sumo can better understand user preferences, which helps them formulate new strategies when developing their games and other endeavours in the future.
Negative Impacts
In recent years, Chinese tech giant Tencent has invested heavily in several mobile gaming companies, including purchasing the Japanese company Sumo Group. This high-profile acquisition has had several impacts on the gaming industry, some positive and some negative.
On the negative side, many smaller developers have increasingly relied on Tencent’s deep pockets to stay afloat. While having a large and well-funded corporate partner can be beneficial in accessing new markets and resources, it can also stifle innovation and competition by creating an uneven playing field.
Furthermore, the purchase of Sumo demonstrated that the trend towards consolidation will continue in the industry, as more tech giants become involved in mergers and acquisitions. This could lead to further homogenization across genres, as big companies prefer to buy out smaller competitors rather than support innovation.
Additionally, Tencent’s vast resources make it difficult for other companies to compete with its size and scale—an issue that often translates into higher costs for consumers, equating to fewer options for game choice in terms of variety and price points.
Conclusion
The $1 billion takeover of Sumo by Tencent is a move that will have far-reaching consequences for the gaming industry. This deal marks a significant shift in the landscape for the industry, and many potential changes are on the horizon. The move allows Tencent to acquire an established gaming platform and company with a top-level product range and global reach, enabling it to take advantage of new opportunities and unify its current offerings.
At the same time, Tencent’s increased presence in Europe and North America could also help bridge cultural divides between Chinese and Western gaming styles. Additionally, Tencent’s financing capabilities could give Sumo access to bigger budgets and more resources – putting it at an advantage compared to competitors who may not be able to match Tencent’s level of investment.
It remains unclear exactly how Tennent will leverage Sumo’s reach and resources, but one thing is certain: this deal will have huge implications for both sides of the business. Ultimately, this game-changing purchase has signalled a shakeup in how gamers experience digital entertainment worldwide.
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