Tencent to become largest shareholder in Japanese video games developer Marvelous

Tencent Holdings is buying a 20 percent stake in video games developer Marvelous, giving the Japanese company capital to develop its game franchises and bolstering the content the Chinese internet giant can offer users. Shenzhen-based Tencent, which runs the world’s largest video games business by revenue, will spend about 7 billion yen (US$65 million), through affiliate Image Frame Investment, to buy stock in the Japanese games maker.

Marvelous will sell 8.62 million new shares for 576 yen apiece, while shareholders Amuse Capital and Nakayama Hayao will sell 2.83 million and 708,600 shares respectively at the same price. The Japanese firm plans to use the money to build out its existing game franchises and launch new ones over the next three years. Its current titles include Story of Seasons and Deamon X Machina.

Tencent has been one of China’s most aggressive overseas investors, backing everything from technology start-ups to coffee-and-doughnuts chain Tim Hortons. Among game developers, Tencent has taken stakes in Epic Games, the North Carolina-based company behind Fortnite, and South Korean studio Bluehole, which fostered PlayerUnknown’s Battlegrounds.
“Tencent’s reason for the investment is probably to learn how to make console games from Japanese companies, one of the last frontiers for the Chinese tech company’s game business,” said Hideki Yasuda, an analyst at Ace Research Institute. “The investment will help Marvelous ride through the period of global economic uncertainty, and release more of its domestically popular titles to the Western market.” Tencent and Marvelous have already been working together, with the Chinese company making a game with the Story of Seasons intellectual property. Marvelous said it decided to expand the relationship so it could invest more in its games, launch new initiatives and expand globally.

The Japanese console games maker said it expects the Covid-19 pandemic and 5G mobile services will serve as catalysts to bring changes to the global video games industry. The company indicated that gamers will demand more from each title, requiring companies to step up their efforts.