(WSJ) After getting off work at a real-estate company in eastern China, Zhu Feiyue spends most of his time on his smartphone.
The 25-year-old accountant watches animated series such as “The King’s Avatar,” about a top online gamer making a comeback. Too impatient to wait for next week’s installment, he reads the online comic book the series is based on. Before turning in, Mr. Zhu usually plays two or three rounds of the mobile game “Honor of Kings.”
The comics, the animated series and the game Mr. Zhu is obsessed with have one thing in common: they’re all created by Tencent Holdings Ltd.
Tencent is best known as the operator of China’s biggest social network, WeChat, and the world’s biggest online game business by revenue. Less frequently acknowledged is the fact that it is also an entertainment powerhouse. Tencent owns China’s biggest online music, online literature, online comics and animation businesses. Its film studio, two-year-old Tencent Pictures, is a growing presence in Hollywood: It is an investor in the big-budget films “Kong: Skull Island” and “Wonder Woman.”
Tencent is building an empire whose reach in the entertainment business is practically unrivaled. It has deep pockets, social media clout and years of experience creating mobile content, all of which are crucial as entertainment increasingly moves online.
With combined monthly active accounts at more than 1.7 billion on WeChat and the popular QQ messaging service, as well as controlling China’s top news portal and video sites, Tencent already has a lot of say in what Chinese see on their smartphones.
To imagine the power of Tencent, think of it as having networking and social media reach well beyond Facebook, a video platform like YouTube plus a movie and series producer akin to a Netfli.
Then add in a huge online publishing business and the biggest online game operator in the world. It’s becoming a force in mobile payments as well.
Tencent Chief Executive Pony Ma announced in 2015 that Tencent focuses on two things: content and connection.
Entertainment has become a battleground for China’s internet giants in their search for new revenue as growth in the country’s huge online population slows. E-commerce company Alibaba Group Holding Ltd. and search engine Baidu Inc. have invested in films and online shows for their video sites.
Young Chinese are increasingly willing to pay for content. iQiyi, Baidu’s video subsidiary, boasts more than 20 million paying subscribers while Tencent’s online literature unit has 2.5 million daily paying readers and is profitable.
Entertainment is part of Tencent’s DNA, as it started a games business in 2003. In 2011, the company launched a broad content strategy. Its aim was to engage users by providing a wide variety of content in different formats. Material that plays well in one format can be adapted for another. Social networking muscle can be flexed to draw people in.
“We want to create a content ecosystem for our users, in which they can read the literature and comics, watch the animation, film and TV series and play the game based on the same story,” says Cheng Wu, chief executive of Tencent Pictures and corporate vice president overseeing entertainment strategy.
Tencent tested the strategy with an internal project in 2012: online comics and animation. Five years later, the unit is the biggest player in China. Then it built China’s biggest online fiction business through mergers and acquisition. Film is the next frontier to conquer.
Here’s how it works: When “Kong: Skull Island” was released in China in March, WeChat dug deep into its user data and sent 46 million targeted advertisements. WeChat and QQ users could download Kong emojis. Twelve of Tencent’s most popular mobile games ran marketing campaigns, with ticket giveaways.
The Kong movie earned $169 million in China, the single biggest haul in its world-wide box office of $565 million, larger than the take from the U.S. and Canada combined.
“Wonder Woman,” which is released globally this weekend on the heels of a U.S. release, could offer Tencent a chance to take the cross-fertilization further. Its animation unit will run a section dedicated to DC Comics, and Tencent is talking to the U.S. comic publisher about making Wonder Woman and some other DC characters heroes in its game “Honor of Kings,” according to people familiar with the matter.
Mr. Gao, the venture capitalist, points out that turning popular fiction or comics into films and games doesn’t always work out. “The synergy won’t be as big as” Tencent expects, he says.
Mr. Cheng, Tencent Pictures chief, says online books, comics and animated series offer easy, relatively low-cost ways to test out stories before adapting them to more expensive formats.
At any rate, Tencent’s first-quarter profit this year was $2.1 billion, bigger than competitor Baidu’s profit for all of 2016. “We’re just getting started,” Mr. Cheng says.
Source: Wall Street Journal by Li Yuan