In recent years, many industry observers have debated whether concentrating on live‑service models is a wise move. Companies such as Sony have taken bold bets on the model only to see disappointing results, while other developers that have stuck with more conventional release strategies, like Capcom, have weathered the storm relatively unscathed.
One of the more recent casualties of the live‑service approach was Highguard, a title that reportedly received backing from Tencent’s TiMi Studio Group. Despite that setback, Tencent remains enthusiastic about the lucrative potential that live‑service games can deliver.
"Our holy grail is definitely live service," explains Yong‑yi Zhu, Vice‑President and head of operations, strategy and compliance for Tencent Games. "If you look at Tencent’s DNA—Honor of Kings, League of Legends, Valorant—those are games that continuously evolve, creating stable revenue streams and strong community bonds. Modern titles are no longer about a brief burst of engagement; they aim to become a lifestyle for players." Zhu’s remarks illustrate that live‑service is only one pillar of a broader, multifaceted strategy.
Since the last interview with GamesIndustry.biz, Tencent’s portfolio has shifted considerably. The UK‑based studios Splash Damage and Bulkhead have spun out as independent entities, following earlier separations of The Chinese Room and Secret Mode earlier in 2025.
While Zhu declined to detail the reasons, he noted that "for some studios we simply can’t amplify their game". "The key question is whether a partnership adds value for both sides," he said.
"If there isn’t enough synergy with our long‑term vision, or if better opportunities exist elsewhere, we may decide the studio is stronger on its own." Zhu is realistic about the fact that not every acquisition will be a perfect fit. "Sometimes market conditions or cultural differences make integration difficult," he admitted. "Not every deal will be a slam dunk." So what does Tencent’s overarching strategy look like? Zhu points to evergreen titles—both single‑player and multiplayer—as essential components.
The company’s mobile portfolio, in particular, showcases a strong emphasis on single‑player experiences that can endure over time. Ultimately, the goal is to nurture sustainable communities that keep players engaged for the long haul. While live service remains a flagship objective, it is not the sole focus.
"An IP can evolve into an evergreen franchise," Zhu observed, citing Call of Duty as an example of a series that refreshes itself repeatedly while maintaining a core identity. Stability is another cornerstone. "Many premium games have seen cycles of hype followed by layoffs," Zhu noted. "Tencent aims to provide steadier employment and revenue streams, avoiding the boom‑and‑bust pattern seen elsewhere." Talent acquisition is equally important.
Zhu stresses that any partnership must be mutually beneficial, with a clear alignment between Tencent’s resources and the developer’s strengths. His division oversees roughly twenty studios worldwide, including Miniclip, Sumo Digital, Funcom, Fat Shark, Sharkmob, 10 Chambers, Stunlock Studios in Europe, Digital Extremes in North America, and Grinding Gear Games in New Zealand. Rather than chasing geographic expansion for its own sake, Zhu focuses on ensuring each studio has the support needed to launch successfully.
This support can range from regional publishing expertise and technical assistance to backend services, testing, and data analysis. "We bring the know‑how we’ve built in China to the global market," he explained. A concrete example is the collaboration on Dune Awakening.
Experts from China and Europe were embedded alongside Funcom’s developers to troubleshoot issues in real time. If the partnership proved valuable, those experts could even become permanent staff members at the studio.
While creative direction generally stays with the individual studio, Tencent may intervene on cross‑studio challenges such as Unreal Engine optimization or regional publishing hurdles in markets like the Middle East, North Africa, or Southeast Asia. When asked whether Tencent is shifting its focus toward larger live‑service projects at the expense of smaller titles, Zhu responded that the answer depends on the studio’s DNA.
Funcom, for instance, had been running the live‑service game Conan Exiles long before Tencent’s acquisition, so supporting that model made sense. Other studios that tried live service but struggled have reverted to premium, high‑quality titles that align with their core competencies. The question of scale also arose.
Bulkhead’s CEO, Joe Brammer, once suggested that Tencent would not consider games under a £50 million budget. Zhu countered that Tencent evaluates projects of all sizes, looking at where a studio is on its development journey and what its ultimate aspirations are. He highlighted that Tencent’s portfolio already includes smaller games and that the company is open to nurturing them.
Zhu cited Larian Studios and FromSoftware—both minority‑stake partners—as “north stars” for Tencent’s investment philosophy. These studios have built their reputations over time, releasing games that may not always be blockbuster hits but consistently expand their audiences and refine their craft. This demonstrates that Tencent values purposeful, incremental growth as much as headline‑grabbing releases. On the topic of internal support structures, Zhu acknowledged that progress in linking Tencent’s Western and Chinese arms has been slower than hoped, partly due to time‑zone challenges.
The focus has therefore shifted to disseminating best practices across the network of studios. He also sees a future where small core teams are supplemented by external specialists—a model that proved effective for Star Wars: Galactic Racer and is being considered for upcoming projects like Expedition 33. Outsourcing decisions are guided by geography and cost‑benefit analyses. Some studios prefer partners in similar time zones, while others are comfortable with distant collaborators.
For example, Sumo Digital may support European studios because of proximity, even though operating out of the UK carries higher expense. Industry trends support this flexible approach.
Amir Satvat’s keynote at Gamescom Dev highlighted a migration of jobs from high‑cost regions such as California to more affordable locales across Asia. Zhu agreed, noting that North America has become increasingly challenging for studios unless they possess a tightly knit, long‑standing development team. While core development teams benefit from co‑location, support functions can thrive in lower‑cost environments. The prominence of Chinese studios at Gamescom’s Opening Night Live sparked speculation about a power shift from West to East.
Zhu welcomed the change, citing titles like Black Myth: Wukong as evidence that Chinese developers have learned what world‑class console and PC experiences look like. Historically, many Chinese studios focused on mobile production and outsourced art at lower tiers, but improved tooling and higher standards are narrowing the gap. One of those tools is artificial intelligence.
Zhu emphasized that AI at Tencent is not intended to replace humans but to augment productivity. Smaller development teams—often 30‑40 people—can leverage AI to generate concept art, assist with rigging, motion matching, code review, and even project‑management tasks like automated Slack bots. This enables teams to produce higher‑quality content without expanding headcount.
He noted that Chinese developers, having grown up alongside rapid AI advancements, tend to embrace these tools more readily than many Western studios, which remain cautious due to ethical, copyright, and player‑reaction concerns. "People should not be afraid of AI," Zhu said, likening it to the early internet—a transformative technology that, once understood, becomes a powerful ally.
Tencent encourages developers to experiment with AI while treating it as a tool rather than a replacement. Content generation remains a more complex issue, especially regarding the copyright status of AI‑created assets. Zhu believes the industry must resolve these legal questions, but he is comfortable when AI draws only from a studio’s own proprietary libraries, ensuring that intellectual property remains within the company’s control.
To safeguard data, Tencent negotiates agreements with AI vendors that prevent external access to internal assets. This protects against inadvertent leakage of Tencent‑owned content into other projects.
Backed by its massive parent company, Tencent Games enjoys the freedom to place bets of varying sizes across a diverse array of studios and products. While it has recently divested from Bulkhead and Splash Damage and redirected the AAA studio Lightspeed, it simultaneously announced a minority stake in W4, the commercial partner of the Godot engine. As Gamescom approaches, Zhu is likely to discuss new initiatives, but the constant thread remains clear: keeping players engaged, whether through live‑service ecosystems or other forms of interactive entertainment.
"My role sits at the intersection of games and the broader Tencent ecosystem," Zhu concluded. "The ultimate metric is player enjoyment, because happy players translate into sustained revenue. The more people love a game, the longer they’ll play it, and that drives the bottom line."