The industry has spent countless columns debating whether a focus on live‑service games is wise. Sony’s gamble fell flat, and many other publishers chasing the allure of steady, recurring income have stumbled, while companies that stuck to more traditional development models—such as Capcom—have emerged relatively unscathed.
One of the more recent casualties of the live‑service model was Highguard, a title reportedly backed by Tencent’s TiMi Studio Group. Yet Tencent itself shows no sign of retreating from the glittering promise that ongoing service games can deliver. "Our holy grail is live service, isn’t it?" says Yong‑yi Zhu, Vice‑President and Head of Operations, Strategy and Compliance at Tencent Games.
"Look at Tencent’s DNA: Honor of Kings, League of Legends, Valorant. Those are games that continuously build on themselves, creating stability for studios and fostering vibrant communities. More and more, games are no longer short‑term engagements; they become lifestyles." Tencent’s massive, ever‑evolving portfolio is designed to support that lifestyle, but a deep conversation with Zhu makes clear that live service is only one facet of a broader strategy. Since GamesIndustry.biz last spoke with Zhu just under a year ago, the landscape has shifted.
UK studios Splash Damage and Bulkhead have spun out as independent entities, following similar moves by The Chinese Room and Secret Mode earlier in 2025. Zhu declined to detail the separations, noting, "For certain studios we feel we can’t amplify their game any further." He added, "The key question for us is whether a partnership makes sense. Are we bringing value to the table as much as the developers are? In some cases there was a lack of synergy with our long‑term vision, or better opportunities elsewhere.
Ultimately, those studios were better off standing alone than staying under Tencent." Zhu is realistic about the fact that not every acquisition will succeed. "Sometimes market conditions or cultural differences make integration difficult.
Not every deal will be a slam dunk," he admits. So what does Tencent’s overall strategy look like? Zhu emphasizes evergreen titles—both single‑player and multiplayer, with the former heavily represented in the company’s mobile catalog—as a cornerstone. "It’s really about building sustainable, long‑term communities and games that keep engaging players," he explains.
While live service remains the "holy grail," it is not the sole focus. "An IP can evolve into an evergreen property. Take Call of Duty, for example; it’s an evergreen IP even though it releases a new version each year." Consistency is the ultimate goal.
"In the past, many premium games saw wild swings—big launches followed by layoffs. We’re trying to bring stability, and you rarely see Tencent behaving that way," Zhu says. Another pillar of the strategy is investing in top‑tier talent, ensuring a synergistic fit between Tencent and the developers it backs.
Zhu oversees operations and strategy for Tencent’s global games division, which encompasses roughly twenty studios. His portfolio includes 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. His focus is less about geographic expansion and more about guaranteeing that each studio succeeds at launch.
This means providing regional publishing support, technical assistance, testing, backend services, and analytical insight—leveraging Tencent’s domestic expertise to help studios thrive internationally. He cites a concrete example: experts from China and Europe were dispatched to assist Funcom on Dune Awakening.
"They sat alongside the developers, tackled issues, and sometimes stayed on as permanent staff if the collaboration proved successful," Zhu notes. Creative direction remains largely in the hands of the individual studios, but Tencent steps in on cross‑studio challenges such as Unreal Engine quirks or regional publishing hurdles in markets like MENA or Southeast Asia.
When Funcom announced redundancies in October and shuttered its subsidiary The Outsiders (the studio behind Metal: Hellsinger), the company said the goal was to concentrate resources on new content for Dune Awakening. This raised the question of whether Tencent prefers larger live‑service projects over smaller ones. "It really depends on the studio," Zhu replies.
He points out that Funcom had been running the live‑service title Conan Exiles long before Tencent’s acquisition, making live service part of its DNA, and Tencent supports that trajectory. Other studios in Tencent’s roster experimented with live service but later pivoted to premium titles, which remain their core strength.
"We want to help studios become best‑in‑class at whatever they do," Zhu says. How small is too small?
Bulkhead CEO Joe Brammer once claimed Tencent wouldn’t consider games under £50 million. Zhu disagrees, stating, "We look at games of all scales.
It’s about where the studio is on its journey and what its destination might be. We do have small games in our portfolio." He highlights Larian Studios and FromSoftware as “north stars” for Tencent’s investments.
Though Tencent holds only minority stakes, both companies have built their franchises gradually, focusing on purposeful, audience‑building experiences rather than massive launches. A year after discussing the creation of Chinese support teams to bridge Tencent’s Western and Chinese operations, Zhu admits progress has been slower than hoped due to time‑zone challenges. The focus has shifted to disseminating best practices across the group. He does see a future for a hybrid model: small core teams supplemented by external development partners—a method that proved successful for Star Wars: Galactic Racer and appears similar to the development cycle of Expedition 33.
"It’s about balancing in‑house staff with outsourced expertise. Sometimes you need high‑precision specialists in a specific location, and that decision rests with the studio head," he explains. Geography plays a crucial role in outsourcing decisions. Some studios favor distant partners; others prefer same‑time‑zone collaboration.
"Sumo could support our European studios because of proximity, but the UK isn’t the cheapest location, so trade‑offs exist," Zhu notes. Amir Satvat’s keynote at Gamescom Dev highlighted a shift of jobs from expensive regions like California to emerging hubs in Asia.
"North America is becoming tougher unless you have a tightly knit, long‑standing team," Zhu agrees, recalling his time at Activision when most of the staff were co‑located in Santa Monica. He observes that this year’s Gamescom Opening Night Live showcased many polished titles from Chinese developers, prompting speculation about a power shift from West to East. "I hope so," Zhu laughs.
"Games like Black Myth: Wukong have shown the world what high‑quality console and PC experiences look like. Chinese developers, once known for mobile and art outsourcing, now understand the standards for high‑end titles." Better tooling, especially AI, is accelerating that transition.
"AI isn’t about replacing people; it’s about making them more effective," Zhu says. Smaller development teams can now produce higher‑quality content faster, thanks to AI‑driven concept art, rigging, motion matching, code review, and even production‑management bots in Slack. He notes Chinese developers are especially comfortable leveraging AI, while Western studios often hesitate due to ethical, copyright, and player‑backlash concerns. "People shouldn’t be afraid of AI," Zhu asserts, likening it to the internet’s early days.
He encourages developers to view AI as a genuine productivity tool. Tencent promotes AI usage but remains cautious about content generation. The company ensures AI tools operate on proprietary data to avoid IP infringement, negotiating agreements that keep training data confined within its studios. In summary, backed by its massive parent, Tencent Games can experiment broadly—placing large and small bets across a diverse studio ecosystem.
While it has recently divested from Bulkhead and Splash Damage and redirected AAA studio Lightspeed, it also announced a minority stake in W4, the commercial partner behind the Godot engine. As Gamescom approaches, Zhu will likely have new projects to discuss, but the constant thread remains clear: whether through live service or other models, the aim is to keep players engaged, delighted, and ultimately, to drive sustainable revenue.