ByteDance offloads gaming unit to Tencent-backed firm in sign of ongoing industry consolidation

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ByteDance has agreed to sell C4Games to a subsidiary of China Ruyi Holdings, a film and game production firm nearly 22 per cent owned by video gaming giant Tencent Holdings, for 259 million yuan (US$35.8 million), Beijing-based China Ruyi said in a Tuesday filing to the Hong Kong stock exchange.

C4Games, acquired by ByteDance in 2021 for an undisclosed amount, is best known for Red Alert Online, derived from the famous 1990s American single-player game Red Alert.

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The latest move comes two months after ByteDance sold two other gaming units to Tencent. In March, the South China Morning Post reported that LightSpeed Studios, one of Tencent’s key gaming units and maker of the popular title PUBG Mobile, absorbed a project in Shenzhen previously owned by ByteDance’s Gravity Studio and an open-world project belonging to ByteDance’s Jiangnan Studio in Hangzhou.

The latest deal signals further consolidation in China’s video gaming industry, the world’s biggest by revenue.

A screenshot of the Crystal of Atlan mobile video game. Photo: Handout

Last November, ByteDance decided to shut down most gaming projects that had not been released online, and pursued asset sales for those that had been launched, including an anime-style role-playing game Crystal of Atlan and sci-fi survival title Earth: Revival.

In January this year, ByteDance confirmed it was in talks with multiple potential buyers for its video game operations, including Tencent.

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The industry has seen a wave of cost-cutting and lay-offs amid economic headwinds and regulatory pressure. Lingxi Games under Alibaba Group Holding has discontinued a game engine project that developed architecture to optimise and simplify how video games are created in a variety of programming languages.

In March, China’s second-largest short video platform operator Kuaishou Technology disbanded a video gaming project in Beijing, laying off around 30 people.

At the start of this year, Tencent’s gaming unit launched a “spring bamboo shoots” initiative to support low- and medium-budget projects, a shift from a previous focus on projects with heavy production costs, according to industry blog Youxiputao.

The National Press and Publication Administration, the regulator in charge of licensing video games in China, approved 95 new titles in April, the smallest batch of approvals so far this year.

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