Tencent has spent a great deal of editorial space debating whether a focus on live‑service models is wise. Companies like Sony have taken big risks on recurring‑revenue games and stumbled, while others such as Capcom, which have stuck to more conventional development paths, have weathered the market relatively well.
One of the recent casualties in the live‑service arena was Highguard, a title reportedly backed by Tencent's TiMi Studio Group. Despite that setback, Tencent remains undeterred about the lucrative potential that live‑service games promise.
"Our holy grail is definitely live service," says Yong‑yi Zhu, Vice President and head of operations, strategy, and compliance for Tencent Games. "Look at our DNA: Honor of Kings, League of Legends, Valorant—these are games that evolve over time, creating stable revenue streams and strong community bonds. More and more, games are becoming lifestyles rather than one‑off experiences." While the company’s massive, ever‑shifting portfolio is built to support that lifestyle, Zhu stresses that live service is only one piece of a broader strategy. Since the last interview with GamesIndustry.biz a little under a year ago, several changes have taken place.
The UK studios Splash Damage and Bulkhead have spun out as independent entities, following earlier separations by The Chinese Room and Secret Mode in 2025. Zhu declined to discuss the specifics, noting that "for certain studios we felt we couldn’t amplify their game." "The key question for us is whether a partnership makes sense.
Are we adding value as much as the developers are? If there’s a misalignment with our long‑term goals, or if better opportunities exist elsewhere, we’ll let the studio go solo. In many cases they thrive more independently than under Tencent’s umbrella." 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 plan look like? Evergreen titles—both single‑player and multiplayer—are central, especially the single‑player experiences that dominate its mobile catalog. The aim is to cultivate lasting communities and keep games relevant over long periods.
Live service remains a cornerstone, but it isn’t the sole focus. "An IP can evolve into an evergreen property," Zhu explains. "Take Call of Duty, for example; it’s essentially an evergreen franchise, even though each release is a new iteration." Stability is the ultimate objective.
"In the past, many premium games saw wild ups and downs, leading to layoffs after a launch. We’re trying to bring consistency and avoid that volatility. Tencent rarely follows that pattern." Talent acquisition is another pillar.
Zhu emphasizes that any collaboration must be synergistic, with both Tencent and the developer bringing something valuable to the table. Zhu oversees operations and strategy for Tencent’s global gaming division, which includes around twenty studios such as 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 ensuring each studio’s upcoming launches succeed. This involves providing regional publishing support, technical assistance, testing, backend infrastructure, and analytics.
"We leverage the expertise we’ve built in China’s domestic market and translate it for global use," he says. A concrete example is the support provided to Funcom on the title Dune Awakening. Experts from China and Europe were embedded alongside Funcom’s team to troubleshoot issues.
If the collaboration proved fruitful, those experts could even be offered permanent positions at the studio. Creative direction and artistic design generally remain the responsibility of the individual studios, but Tencent steps in on cross‑studio challenges, such as optimizing Unreal Engine pipelines or navigating publishing in regions like the Middle East, North Africa, or Southeast Asia. When Funcom faced layoffs last October and shuttered its subsidiary The Outsiders (the creators of Metal: Hellsinger), the company explained that the goal was to concentrate resources on new content and enhancements for Dune Awakening.
This raises the question: is Tencent shifting its emphasis toward larger live‑service projects at the expense of smaller titles? "It depends on the studio," Zhu replies.
He notes that Funcom had already been running the live‑service game Conan Exiles before Tencent’s acquisition, making live service part of its core DNA. "We support them on that journey." Other studios in Tencent’s roster have experimented with live service but later pivoted back to premium experiences, which remain their bread‑and‑butter. "Our aim is to help studios become best‑in‑class at whatever they do, whether that’s live service or high‑quality single‑player games." How small is too small?
Bulkhead’s CEO Joe Brammer previously claimed Tencent wouldn’t consider games under a £50 million budget. Zhu disagrees, stating the company evaluates projects of all scales based on the studio’s stage and long‑term vision.
"We have small games in our portfolio, and we’re open to helping them grow if the fit is right." Larian Studios and FromSoftware serve as "north stars" for Tencent’s investment philosophy. Although Tencent only holds minority stakes, both companies have built their franchises incrementally, focusing on purposeful, audience‑building titles rather than chasing immediate blockbuster sales. A year after Zhu discussed creating joint Chinese support teams to bridge Tencent’s Western and Chinese operations, progress has been slower than hoped due to time‑zone challenges.
The focus has shifted to disseminating best practices across the group’s many studios. Zhu envisions a hybrid model where small core teams are supplemented by external specialists—a method that proved successful for Star Wars: Galactic Racer. He likens this approach to the development cycle of Expedition 33, where internal and outsourced talent work together seamlessly.
Deciding how many staff to keep in‑house versus outsource depends on the need for highly specialized skills and geographic considerations. Some studios prefer partners in the same time zone, while others are comfortable with distant collaborators.
For example, Sumo Digital may support European studios because of proximity, even though operating costs in the UK are relatively high. This mirrors Amir Satvat’s keynote at Gamescom Dev, which highlighted a shift of jobs from expensive regions like California to emerging hubs across Asia. "Headcount is moving from North America to virtually anywhere else," he observed. Zhu concurs, noting that North America is becoming increasingly difficult for studios without a tightly knit, long‑standing development team.
He draws on his own experience at Activision, where a stable Santa Monica team delivered content year after year. For support functions, however, “it doesn’t make sense to be based in such an expensive region.” The prominence of Chinese studios at this year’s Gamescom Opening Night Live suggests a possible power shift from West to East.
Zhu smiles and says, "I hope so. Games like Black Myth: Wukong have shown the world what high‑quality console and PC experiences look like." He adds that many Chinese developers, historically known for mobile titles, are now applying that expertise to console and PC development, aided by better tools and higher standards. "We used to do a lot of low‑level art outsourcing, but now we understand what top‑tier quality looks like." Advanced tooling includes AI, which Zhu describes as a productivity enhancer rather than a replacement for human talent.
"AI helps us iterate faster, produce higher‑quality assets, and keep our teams lean while still delivering impressive results." Chinese developers, raised in an era of AI‑driven pipelines, embrace these tools enthusiastically. In contrast, Western studios often approach AI with caution due to ethical, copyright, and player‑reaction concerns.
Zhu advises, "People shouldn’t be afraid of AI; it’s like the internet—inevitable and useful. I’ve personally explored how AI can make my daily work more efficient." He encourages developers to view AI as a genuine utility across coding, art, and production management. Tencent promotes AI adoption, seeing vast potential for tasks such as concept art generation, rigging, motion matching, code review, and even automated Slack bots that assign homework. However, he acknowledges ongoing challenges around the copyright status of AI‑generated content.
"The industry must resolve these issues. If AI uses only our own libraries, it’s straightforward because it’s our IP. Using external data is more problematic, so we keep our training data confined to our studios." To protect intellectual property, Tencent negotiates agreements with AI tool providers ensuring that data does not leave its secure environment.
"We don’t want developers inadvertently creating assets that leak into other games." Backed by its massive parent company, Tencent Games can experiment broadly, placing bets of varying size across a diverse studio network. While it has recently let go of Bulkhead and Splash Damage and redirected the AAA studio Lightspeed, it also announced a minority stake in W4, the commercial partner of the Godot engine, just before our conversation.
It is likely that at the next Gamescom Zhu will have new projects to discuss, but the constant thread remains engagement—whether through live service or other models. "At the end of the day, I sit within the games division of a larger Tencent ecosystem, and my focus is always on keeping players engaged and having fun," Zhu concludes. "In simple terms, that translates to the bottom line: the more people love and play your game, the better the financial outcome."