The industry has spent countless column inches debating whether the live‑service model is a sound focus. Sony’s gamble fell short, as did many other developers chasing a steady stream of recurring revenue, while companies that stayed on a more conventional path, such as Capcom, have emerged relatively unharmed.
One of the more recent casualties of the live‑service experiment was Highguard, a title reportedly backed by Tencent’s TiMi Studio Group. Despite that setback, Tencent itself remains undeterred by the alluring prospects 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 at Tencent Games. "Look at Tencent’s DNA—Honor of Kings, League of Legends, Valorant.
Those games keep building on themselves, creating stable studios and thriving communities. More and more, games aren’t just short‑term engagements; they become lifestyles." While the company’s massive, ever‑shifting portfolio is designed to support that lifestyle, Zhu stresses that live service is only a piece of a broader strategy. Since GamesIndustry.biz last spoke with Zhu a little under a year ago, several shifts have occurred. The UK studios Splash Damage and Bulkhead have become independent, following earlier spin‑offs of The Chinese Room and Secret Mode in 2025.
Zhu declined to detail the separations, noting, "For certain studios we felt we couldn’t amplify their game." "The key question is whether a partnership makes sense. Are we adding value as much as the developer is? If there’s a mismatch—either the game doesn’t align with our long‑term vision or there are better opportunities—we may decide the studio is stronger on its own," he explains.
Zhu is realistic about acquisitions that don’t pan out. "Sometimes market conditions or cultural differences make integration tough.
Not every deal will be a slam dunk," he admits. So what does Tencent’s overall strategy look like? Evergreen titles—both single‑player and multiplayer—are central, especially the single‑player experiences that dominate its mobile catalog.
The goal is to nurture sustainable, long‑term communities that keep players engaged over years. Live service remains the pinnacle, but it isn’t the sole focus. "It can be an IP you build up," Zhu says, citing Call of Duty as an evergreen franchise that persists through successive releases. Consistency is the ultimate aim.
"Many premium games have seen wild ups and downs, with studios laying off staff after a launch. We’re trying to bring stability, and you rarely see Tencent doing the opposite," he notes. 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 gaming division, which includes roughly 20 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 emphasis is less on geographic expansion and more on guaranteeing that each studio succeeds in its upcoming launches. This involves providing regional publishing support, technical assistance, testing, backend services, and analytical expertise—leveraging the know‑how Tencent has honed in its domestic market and translating it to the global arena.
For example, experts from China and Europe collaborated on Funcom’s Dune Awakening, sitting alongside the developers to troubleshoot issues. If a problem persists, the experts may stay on, and sometimes they are offered permanent positions at the studio. Creative and artistic direction generally stays with the individual studios, but Tencent will step in on cross‑studio challenges, such as specific Unreal Engine hurdles or publishing logistics in regions like MENA or Southeast Asia. When Funcom announced layoffs in October and shut down its subsidiary The Outsiders (the studio behind Metal: Hellsinger), the rationale was to concentrate internal resources on new content and features for Dune Awakening.
This raised the question of whether Tencent prefers larger live‑service projects over smaller endeavors. "It really depends on the studio," Zhu replies. He points out that Funcom had already been running the live‑service title Conan Exiles before Tencent’s acquisition, making live service part of its DNA, and Tencent supports that trajectory. Other studios in Tencent’s roster attempted live service but found it unsuitable, subsequently refocusing on premium titles—their traditional strength.
"We want to help studios become best‑in‑class at whatever they do," Zhu says. How small is too small?
Bulkhead’s CEO Joe Brammer previously claimed Tencent would not consider games under £50 million. Zhu disagrees, stating the company evaluates projects of all scales, focusing instead on where a studio is in its journey and its ultimate destination.
"We do have small games in our portfolio," he affirms. Larian Studios and FromSoftware serve as "north stars" for Tencent’s studio investments. Although Tencent holds minority stakes, both companies have built their franchises gradually, producing purposeful titles that steadily expand their audiences and refine their craft.
This demonstrates that Tencent does not disregard smaller projects. A year after discussing the creation of Chinese support teams to bridge Tencent’s Western and Chinese arms, Zhu admits progress has been slower than hoped due to time‑zone challenges. The focus has shifted to disseminating learnings across the group’s studios.
He envisions a model where compact core teams are bolstered by external development partners—a model that proved effective for Star Wars: Galactic Racer and appears applicable to upcoming projects like Expedition 33. The balance between in‑house staff and outsourced talent depends on the need for highly specialized expertise and geographic considerations. Location matters in outsourcing decisions.
Some studios favor distant partners, while others prefer collaborators in the same time zone. For instance, Sumo Digital may support European studios because of proximity, even though the UK isn’t the cheapest location. Trade‑offs are inevitable. Amir Satvat’s keynote at Gamescom Dev highlighted a shift of jobs from expensive hubs such as California to regions across Asia.
Zhu concurs, noting that North America is becoming increasingly challenging unless a studio has a tightly knit, long‑standing team. He draws on his own experience at Activision, where a concentrated Santa Monica team delivered content year after year. For support functions, however, “it doesn’t make sense to be in such an expensive part of the world.” The recent Gamescom Opening Night Live showcased a slew of polished titles from Chinese studios, prompting speculation about a power shift from West to East.
Zhu smiles, “I hope so. I was born in China, and games like Black Myth: Wukong have shown the world what high‑quality console and PC experiences look like.” Chinese developers, traditionally strong in mobile, are now aiming for console‑level quality, aided by better tooling and AI.
"AI helps us iterate faster and produce higher‑quality assets without expanding our team size," Zhu explains. He emphasizes that AI is a productivity enhancer, not a replacement for human talent.
In the West, developers tend to be more cautious about AI due to ethical, copyright, and player‑reaction concerns. Zhu urges a less fearful stance: "AI is like the internet—inevitable and useful. I’ve spent time figuring out how to use it efficiently in my own workflow." Tencent encourages developers to adopt AI as a genuine tool across coding, art, rigging, motion matching, code review, and even production management (e.g., AI bots in Slack). Content‑generation AI remains a more complex conversation, especially regarding copyright.
Zhu believes the industry must resolve these issues, and Tencent mitigates risk by restricting AI training data to its own libraries and securing agreements with tool providers to keep data in‑house. Backed by its massive parent, Tencent Games can experiment broadly, placing bets of varying size across a diverse studio portfolio. While it recently stepped back from Bulkhead and Splash Damage and redirected AAA studio Lightspeed, it also announced a minority investment in W4, the commercial partner for the Godot engine.
Zhu is likely to have fresh projects to discuss at the next Gamescom. Ultimately, Zhu’s guiding principle is engagement: "I sit within games, part of a larger Tencent ecosystem, and my focus is always on keeping players engaged and having fun. In simple terms, that translates to the bottom line—the more people love your game, the more they’ll play it."