Tencent’s desire to merge the fish and tiger teeth threatens to trigger antitrust regulations.

Tencent is seeking a merger of the streaming platform Doosan and Tiger’s Tooth to further consolidate its dominance in the industry. Shares in Doufish and Tiger Tooth jumped 6% and 7.8% respectively at the close of trading on August 5. Tencent’s shares also closed up 2.8 per cent in Hong Kong on August 6. But Tencent’s attempt is being challenged by antitrust figures.

Tencent's desire to merge the fish and tiger teeth threatens to trigger antitrust regulations.

“Tencent’s left-handed ‘eat chicken’ (PUBG), right-hand ‘pesticide’ (King’s glory), both games have accounted for more than 67% of the Mobile game market share, even from the perspective of vertical monopoly, are problematic, not to mention the fish and tiger teeth if merged, involving horizontal monopoly.” “

Tencent is already a shareholder in both companies.

Tencent, already the biggest shareholder and owns more than a third of The Fish, has been hoping to merge several of its big gaming platforms for months. Mr. Yu’s lawyers believe that Tencent’s merger of Fish and Tiger’s Tooth will certainly trigger antitrust concerns, but it is hard to say whether the eventual merger will face regulation because of the industry’s practice of circumventing censorship.

“I don’t think Tencent has broken through the rules and frameworks and principles of existing laws, and still applies to antitrust laws, that is, if you want to merge fish and tiger teeth, then it has to follow the antitrust law and make antitrust declarations.” A professor of anti-monopoly law at a Shanghai university told First Financial Reporter that “if an operator is concentrated in one of the following standards, it shall report to the competent department of commerce under the State Council in advance, and the undeclared one may not be centralized”. The two criteria are: the total annual global turnover of all operators participating in the concentration exceeds RMB10 billion, or the total turnover in China exceeds RMB 2 billion.

Tencent’s PUBG Mobile, the mainland version of “Peace Elite”, reported revenue of $621m in the last quarter, according to Sensor Tower, the world’s highest-earning mobile game despite a quarterly decline of 8 per cent, with revenue peaking in March and $270million in the first half of the year. Tencent’s “Glory of the Kings” came in second.

Nomura said in a research report on August 4th that Tencent’s second-quarter results were expected to exceed market expectations. Mainly driven by strong growth in Mobile game, the company’s second-quarter revenue is expected to grow 29% year-on-year, 2 percentage points above market expectations, while the parent company’s second-quarter earnings per share, based on non-GAAP, were Rmb3.12, up 27% year-on-year and 4% above market expectations.

Tiger’s Tooth and Fish are the top two platforms in streaming sites and video games, both listed in the U.S. with a combined market capitalisation of $10 billion. Users can watch eSports games on these platforms and follow professional players.

On April 3 this year, Tencent bought more than half of its total stake in Hutton with $260m in cash, making it the largest shareholder. Tencent merged the hustings and said it would continue to operate independently.

In May, Tiger Tooth reported its first financial results since being held by Tencent Holdings, with first-quarter revenue of more than 2.4 billion yuan, up 48% from a year earlier, and net profit of 170 million yuan. In the first quarter, the average number of mobile monthly live users reached 74.7 million, an increase of nearly 40% year-on-year, and the average monthly number of live users reached 150 million, up 22% year-on-year.

Notably, Tiger’s first-quarter live revenue reached 2.27 billion yuan, up 46.5 percent year-on-year, mainly due to an increase in average spending per single paid user and an increase in the number of paying subscribers.

Dong Rongjie, CEO of Tiger Tooth, said the two sides have been strengthening cooperation since Tencent Holdings, particularly in terms of live content and capabilities. In order to better serve users and anchors, Tiger Tooth is working closely with Tencent in areas such as gaming, eSports and artificial intelligence technology to develop new features, products and services.

“With Tencent’s support and the support of our large user community, we believe we have the ability to strengthen our position in the game streaming space and seize more opportunities in the game value chain.” We see this cooperation as the beginning of a new journey. Mr Dong said.

In 2019, fish revenue was RMB7.28 billion, double the year-on-year. Doobig’s first-quarter results released earlier this year showed revenue of RMB2,278 million, up 53% YoY, gross profit of RMB486 million, up 139% YoY, and non-GAAP net profit of RMB297 million, up more than seven-fold YoY, and achieved profit for five consecutive quarters. In the first quarter, live game revenue for fishing revenue exceeded 2.1 billion yuan, up 56% year-on-year.

Against Byte Dance.

“The Chinese share of the two video game broadcast sites, Tiger Tooth and Fighting Fish, may have reached more than 70%, and the merger is certainly a suspicion of monopoly, ” the head of a Chinese company that specializes in the game business told First Financial. But when Tencent talks about the game, it counts live platforms such as Sounding and Gathering to reduce its market share. “

According to MobTech, If it merges the live-streaming platform of Doosan and Tiger’s Teeth, Tencent will gain market share of more than 80% of China’s live gaming platforms, reducing costs and weakening competition in the market.

Cui Chenxuan, a senior analyst in the Game Industry at Omdia, told First Financial: “If the two live platforms are merged and still operate independently and compete, it will not constitute a monopoly, but it will depend on the subsequent operating mechanism.” “

For a long time, the battle for fish and tiger teeth was fiercely competitive, throwing a lot of money at the signing game’s live anchors, a resource that often cost tens of millions of dollars. China’s live gaming market is expected to generate Rmb23.6bn ($3.4bn) in revenue this year, according to AerRe Consulting.

In addition, although the fish, tiger-toothed game live industry, but in recent years, fast hand, B station also high-profile plus code game live track, which makes the market pattern change. In 2019, Fast Hand began to increase its live game investment, signing hundreds of exclusive anchors and rapidly rising in the field of live gaming.

According to Guosheng Securities data, early 2020 fast hand platform overall monthly live users have exceeded 300 million, live daily live users more than 100 million, of which the game live daily live number of nearly 51 million, not only the absolute number of more than fish, tiger teeth, the entire game live market share is also close to 17%.

On the other hand, the merger of the two big gaming platforms could also help Tencent counter the competitive pressure strain from new giants such as Byte Dance. ByteDance is also developing a number of mature games. In April, ByteDance’s gaming business will continue to hire more than 1,000 teams this year to meet the needs of several gaming product lines, according to a micro-headline in April.

Yan said, optimistic about the development direction of the game, there will be patient and sustained investment. The gaming business is the long-term business direction set within ByteDance. First Financial reporter sits that ByteDance’s Shanghai office will expand, and Shanghai is the main research and development location for ByteDance’s gaming team. ByteDance has been preparing for three years, from research to launching the game-related business, according to people familiar with the matter.