Tencent’s strategic outlook is built around three interlocking pillars: the pursuit of live‑service ecosystems, the integration of advanced AI tools, and the cultivation of evergreen intellectual property that can sustain long‑term player engagement. In a recent, in‑depth conversation with Yong‑yi Zhu, Vice‑President and Head of Operations, Strategy and Compliance for Tencent Games, the company’s nuanced approach to growth and risk management was laid bare.
### Live‑Service as a Core Driver, Not a Sole Obsession Zhu opened the interview by describing live service as the “holy grail” for Tencent, referencing the company’s flagship titles—Honor of Kings, League of Legends, and Valorant—as exemplars of games that continuously evolve and nurture vibrant communities. These titles, he explained, provide a stable revenue stream and turn casual play into a lifestyle habit for millions of users worldwide. However, Zhu was quick to clarify that live‑service is only one facet of a broader, diversified strategy. The discussion highlighted recent setbacks in the live‑service arena, such as the cancellation of Highguard, a project reportedly backed by TiMi Studio Group.
While some competitors, like Sony, have stumbled while chasing recurring‑revenue models, others such as Capcom have thrived by sticking to more traditional, single‑release cycles. Tencent, according to Zhu, is learning from these outcomes and adjusting its portfolio accordingly. ### Strategic Studio Partnerships and Selective Acquisitions Over the past year, Tencent has re‑evaluated several of its studio relationships.
Notably, UK‑based developers Splash Damage and Bulkhead were spun off to operate independently, mirroring earlier departures by The Chinese Room and Secret Mode in 2025. Zhu emphasized that the decision was driven by a lack of strategic fit rather than performance issues: “If the partnership doesn’t amplify the game or align with our long‑term vision, we may decide the studio is better off standing alone.” He also acknowledged the challenges inherent in integrating new studios, citing cultural differences and shifting market conditions as common obstacles. “Not every acquisition becomes a slam‑ dunk,” Zhu admitted, underscoring Tencent’s realistic expectations for growth through M&A. ### Evergreen IP and Sustainable Communities Beyond live‑service, Tencent places a premium on evergreen IP—titles that can be iterated upon year after year while retaining a loyal fan base.
Zhu cited Call of Duty as a prime example: although each release is a new installment, the underlying franchise remains a constant revenue engine. Tencent’s own portfolio reflects this mindset, with a blend of single‑player and multiplayer experiences, many of which are anchored in the mobile market. The goal, according to Zhu, is to create “consistent, long‑term communities” that avoid the boom‑and‑bust cycles seen in the premium‑game sector, where studios often face layoffs after a single launch. By fostering stability, Tencent hopes to become a reliable partner for developers, offering both financial backing and operational support.
### Global Studio Network and Knowledge Sharing Zhu oversees roughly twenty studios across the globe, including Miniclip, Sumo Digital, Funcom, Fat Shark, Sharkmob, 10 Chambers, Stunlock Studios, Digital Extremes, and Grinding Gear Games. His focus is less on geographic expansion and more on ensuring each studio has the resources needed for successful launches.
This support spans regional publishing, technical assistance, testing, backend infrastructure, and data analytics. A concrete illustration of this collaborative model is the assistance provided to Funcom on the live‑service title Dune Awakening. Engineers and artists from Tencent’s China and Europe offices worked side‑by‑side with Funcom’s team, sometimes staying on‑site for extended periods. When a contributor proved valuable, Tencent even offered a permanent position within the studio.
While Tencent can intervene on technical challenges—such as Unreal Engine optimizations or region‑specific publishing hurdles—it generally leaves creative direction to the individual studios. This balance allows developers to retain artistic autonomy while benefiting from Tencent’s extensive operational expertise. ### Tailoring Support to Studio Size and Vision When asked whether Tencent only backs large‑scale projects, Zhu refuted the notion that a £50 million threshold dictates investment decisions. He explained that the company evaluates studios based on their stage in the development journey and the potential for growth.
“We have small games in our portfolio,” he said, pointing to partnerships with studios like Larian and FromSoftware, which, despite modest budgets, have built enduring, purpose‑driven franchises. Zhu also described a hybrid development model where a core internal team is supplemented by external specialists—a strategy that proved effective for titles like Star Wars: Galactic Racer and the upcoming Expedition 33. This flexible staffing approach lets Tencent allocate resources efficiently, matching talent to the specific technical demands of each project. ### Geographic Considerations and Outsourcing Dynamics Location remains a critical factor in Tencent’s outsourcing decisions.
Proximity can reduce communication friction, but cost considerations also play a role. For instance, Sumo Digital may support European studios due to timezone alignment, even though the UK is relatively expensive. This calculus mirrors broader industry trends highlighted by Amir Satvat’s Gamescom Dev keynote, which noted a shift of development headcount from high‑cost regions like California to more affordable hubs across Asia. Zhu concurred, noting that North America is becoming increasingly challenging for large‑scale teams, whereas support functions can be more economically placed elsewhere.
He stressed that the ultimate objective is to maintain high‑quality output without inflating operational expenses. ### The Rise of Chinese Studios on the Global Stage The prominence of Chinese developers at Gamescom’s Opening Night Live sparked speculation about a power shift from West to East.
Zhu expressed optimism, citing successes such as Black Myth: Wukong, which demonstrated that Chinese teams can produce console‑level experiences that set new quality benchmarks. He observed that many Chinese studios, historically known for mobile expertise, are now applying that knowledge to high‑end PC and console projects, aided by improved tooling and pipelines. ### AI as an Enabler, Not a Replacement Artificial intelligence emerged as a recurring theme in Zhu’s narrative. He framed AI as a productivity enhancer that helps smaller teams achieve the output of larger studios.
Applications range from concept‑art generation and rigging to code review and motion‑matching. Tencent encourages developers to experiment with AI tools, viewing them as extensions of the creative process rather than replacements for human talent.
Zhu also acknowledged the legal and ethical complexities surrounding generative AI, particularly regarding copyright. Tencent mitigates risk by restricting AI training data to internally owned assets and negotiating strict data‑use agreements with tool providers. This safeguards the company’s IP and prevents inadvertent leakage of proprietary content. ### Looking Ahead: Investment, Experimentation, and Engagement Backed by its massive parent corporation, Tencent Games enjoys the flexibility to place bets across a spectrum of scales—from modest indie titles to AAA blockbusters.
While recent divestments such as Bulkhead and Splash Damage signal a willingness to prune underperforming assets, new investments—like the minority stake in W4, a commercial partner of the Godot engine—illustrate an ongoing commitment to innovation. Zhu summed up the overarching mission: “My job is to keep players engaged and having fun. When people love a game, they keep playing, and that ultimately drives the bottom line.” Whether through live‑service ecosystems, evergreen franchises, or AI‑driven development pipelines, Tencent’s strategy is centered on sustaining long‑term player relationships and delivering consistent value across its global portfolio.