Tencent’s gaming division has been the subject of intense debate, especially around its heavy investment in live‑service titles. Critics point to companies like Sony, which took a gamble on recurring‑revenue models and suffered setbacks, while more traditional publishers such as Capcom have largely avoided the turbulence. Even within Tencent’s own ecosystem, some live‑service projects have faltered – Highguard, a game reportedly backed by TiMi Studio Group, is a recent example of a title that did not meet expectations.
Yet, despite these hiccups, the company remains convinced that the live‑service model holds the key to sustained growth. "Our holy grail is live service," explains Yong‑yi Zhu, Vice President and head of Operations, Strategy and Compliance at Tencent Games.
"Look at our DNA – Honor of Kings, League of Legends, Valorant – these are games that continuously evolve, fostering stable revenue streams and vibrant player communities. The goal is to turn a game from a short‑term experience into a lasting lifestyle for its audience." Zhu’s recent interview reveals that live service is only one pillar of a broader, multi‑faceted strategy. Since the last conversation with GamesIndustry.biz, several of Tencent’s Western studios – including the UK‑based Splash Damage and Bulkhead – have been spun off as independent entities, following earlier separations of The Chinese Room and Secret Mode in 2025.
Zhu declined to detail the exact reasons, but emphasized a simple principle: a partnership must be mutually beneficial. When the fit isn’t right, either because the studio’s vision diverges from Tencent’s long‑term goals or because better opportunities exist elsewhere, the company prefers to let the studio thrive on its own. "We’ve had cases where integration proved difficult due to market conditions or cultural mismatches," Zhu admits. "Not every acquisition will be a home run, and that’s okay." The core of Tencent’s roadmap, according to Zhu, is the cultivation of evergreen titles – games that remain relevant and profitable over many years.
This includes both single‑player experiences, which dominate the company’s mobile portfolio, and multiplayer experiences that nurture long‑lasting communities. While live service is a preferred route, it is not the sole focus. Zhu points to franchises like Call of Duty, which, despite being released as successive versions, are treated as evergreen intellectual property that continuously engages players. Stability is a recurring theme.
Zhu observes that many premium developers have experienced boom‑and‑bust cycles, launching a hit title only to face layoffs when the next project stalls. Tencent aims to avoid that volatility by providing a steady backbone of support and resources, allowing studios to maintain consistent staffing levels and focus on long‑term player engagement.
Talent acquisition and synergy are also crucial. Zhu stresses that Tencent looks for high‑quality developers whose strengths complement the company’s capabilities.
His division oversees roughly twenty studios worldwide, ranging from European outfits like Miniclip, Sumo Digital, Funcom, Fat Shark, Sharkmob, 10 Chambers, and Stunlock Studios, to North American partners such as Digital Extremes, and New Zealand’s Grinding Gear Games. Rather than chasing geographic expansion, Zhu’s priority is ensuring each studio has the tools it needs to launch successfully. This includes regional publishing expertise, technical assistance, testing services, backend infrastructure, and data analytics. He cites a concrete example: experts from both China and Europe were dispatched to collaborate with Funcom on the launch of *Dune Awakening*.
These specialists worked side‑by‑side with the development team, addressing technical challenges and, in some cases, transitioning to permanent roles within the studio. Creative direction generally remains in the hands of the individual studios, but Tencent steps in when common technical hurdles arise – for instance, troubleshooting issues with Unreal Engine or navigating publishing requirements in regions such as the Middle East, North Africa, or Southeast Asia. The conversation also touched on the recent layoffs at Funcom and the closure of its subsidiary The Outsiders, the creators of *Metal: Hellsinger*. Funcom explained that the cuts were intended to concentrate resources on new content for *Dune Awakening*.
When asked whether Tencent is shifting focus toward larger live‑service projects at the expense of smaller titles, Zhu replied that the decision is studio‑specific. Funcom, for example, had already been operating the live‑service game *Conan Exiles* before Tencent’s acquisition, making that model a natural fit for its DNA. Other studios in the Tencent portfolio have experimented with live service but reverted to premium titles when the model didn’t deliver. Zhu emphasizes that Tencent’s role is to help studios excel in whatever niche they dominate, whether that’s high‑budget AAA experiences or niche, craft‑focused games.
There is a misconception that Tencent only backs massive projects. Bulkhead’s CEO, Joe Brammer, once suggested that Tencent would not consider games under a £50 million budget. Zhu refutes this, stating that the company evaluates games of all scales based on the studio’s stage of development and its ultimate ambitions. "We have small games in our portfolio," he says, citing Larian Studios and FromSoftware as “north stars” – minority‑stake investments that demonstrate how a studio can build a series of purposeful, audience‑building titles without necessarily being blockbuster‑size.
On the operational side, Zhu noted that plans to more tightly integrate Tencent’s Chinese and Western support teams have stalled due to time‑zone challenges. Instead, the focus has shifted to disseminating best‑practice learnings across the global network. He envisions a hybrid development model where core teams are supplemented by external specialists – a strategy that proved effective for *Star Wars: Galactic Racer* and is being examined for upcoming projects like *Expedition 33*.
Outsourcing decisions are heavily influenced by geography and cost. Some studios prefer partners in the same time zone for tighter collaboration, while others are comfortable with distant vendors. For example, Sumo Digital may support European studios because of proximity, even though the UK is not the cheapest location.
This reflects a broader industry trend highlighted by Amir Satvat at Gamescom Dev: development talent is migrating from high‑cost regions such as California to more affordable hubs across Asia. Zhu agrees, noting that North America is becoming increasingly challenging for studios without a long‑standing, tightly knit team.
He draws on his own experience at Activision, where the Santa Monica office consistently delivered content year after year. For support functions, however, maintaining a presence in expensive locales makes little sense. The rise of Chinese studios at Gamescom’s Opening Night Live sparked speculation about a power shift from the West to the East.
Zhu welcomed the notion, pointing to titles like *Black Myth: Wukong* that have raised the bar for console and PC quality. He observes that many Chinese developers, historically known for high‑quality mobile games, are now applying those standards to larger platforms, aided by improved tooling and a willingness to adopt new technologies. One such technology is artificial intelligence.
Zhu stresses that AI at Tencent is viewed as an enhancer rather than a replacement for human talent. Smaller development teams can leverage AI to accelerate content creation, iterate faster, and achieve higher visual fidelity without expanding headcount. He describes AI tools being used for concept art, rigging, motion matching, code review, and even production management – such as AI bots in Slack that assign tasks.
While Chinese developers appear eager to embrace AI, Western studios often exhibit caution due to ethical concerns, copyright issues, and potential player backlash. Zhu advises developers not to fear AI, likening it to the internet’s early days: "It’s a tool that can make you more efficient if you learn how to use it wisely." He acknowledges ongoing challenges, particularly around the ownership of AI‑generated assets. Tencent mitigates risk by restricting AI training data to its own libraries, ensuring that any generated content remains within the company’s intellectual property. Contracts with AI providers further guarantee that data does not leak outside the studio environment, protecting against inadvertent duplication of Tencent’s assets in other games.
Backed by the massive resources of its parent company, Tencent Games can experiment across a broad spectrum of investments – from large‑scale AAA studios to niche indie partners. Although recent moves have seen the company step back from Bulkhead and Splash Damage, and redirect its focus from Lightspeed, it simultaneously announced a minority stake in W4, the commercial partner behind the Godot engine. This signals a continued commitment to diversifying its portfolio while keeping player engagement at the forefront. In Zhu’s own words, the ultimate mission is simple: "We sit within the games division of a larger Tencent ecosystem, and our constant question is how to keep players engaged and having fun.
The more people love a game, the more they play it, and that translates directly to the bottom line."