Tencent chief says gaming business under threat, catching up in AI

HONG KONG (Reuters): Pony Ma, chief executive and co-founder of Tencent Holdings (0700.HK), opens new tab, has said that the company’s video games business faces great challenges from competitors but is catching up in artificial intelligence (AI) development.

Ma, speaking at Tencent’s annual meeting in a stadium in Shenzhen on Monday, said that the company has been resting on its laurels in gaming while competitors have delivered new hits. Video games account for more than 30% of Tencent’s revenue.

Chinese media outlet Jiemian published parts of Ma’s speech online. A person with direct knowledge of the matter, who declined to be named because they are not permitted to speak to the media, confirmed the contents.

Ma’s speech underscores concerns whether Tencent, the world’s biggest gaming company and the operator of China’s biggest social network WeChat, can defend its status as China’s No.1 tech company at a time marked by intensifying competition and new disruptive technologies.

Tencent did not respond to a request for comment on Tuesday.

“Gaming is our flagship business…But in the past year, we have faced significant challenges,” Ma said, “We have found ourselves at a loss, as our competitors continue to produce new products, leaving us feeling having achieved nothing. ”

Ma added that the new games that Tencent has launched had not performed as well as the company had hoped.

Ma’s remarks come at a time when Chinese game developers miHoYo and NetEase (9999.HK), opens new tab have outshone Tencent with hit titles like “Genshin Impact” and “Eggy Party”. While Tencent’s past hits such as “Honor of Kings” and “PUBG Mobile” continue to deliver strong revenue, more recent products are falling short of expectations.

When it comes to AI, Ma said Tencent has caught up. “We can finally follow the pace of the first-tier companies. We don’t count ourselves as the most leading but at least we are not too behind,” he said.

Ma said Tencent’s focus now should be on integrating its “Hunyuan” AI model into different business scenarios as a way to boost efficiency rather than to quickly turn AI into products.

“In the short term, within the next one or two years, I feel like there will not be a massive, AI-native application yet,” he said.

Another focus of Ma’s speech was on live-streaming e-commerce. Tencent has been trying to make WeChat more like ByteDance’ short video platform Douyin in recent years, which has been making massive revenue from live-streaming e-commerce.

“WeChat is our most robust platform regarding daily user amount and its ecosystem. But it is 12 years of age… Now how we can find new sprouts from the old tree that is WeChat is the big question for us,” Ma said.