Streaming platform Huya announced it has raised $461.6million in its latest series B funding round which was led by Tencent on Mar 9. Additionally, its major rival Douyu received an investment of $632million from Tencent as well.
The two streaming platforms hold leading positions in the Chinese esports video streaming markets and both of them are seeking IPO opportunities in US and Hong Kong, respectively. This is not first time Tencent has invested in Douyu, and this is expected to accelerate Douyu’s listing progress. Huya, backed by YY.COM, received its first investment from Tencent, which has obtained the right to purchase additional shares to reach 50.1% of the voting power during the next three years.
Tencent values its esports business and has invested greatly to complete its ecosystem via a diverse games portfolio, building pro leagues and organizing championship events. This next move to fund the major domestic players in the live streaming market along with its own Tencent Video platform indicates that the company plans to continue to embrace this rising sector and shows its ambition to dominate the market. Investing in two leading platforms together supported by the company’s rich cash flow mirrors Tencent's strategy to dominate and monopolise in other areas of the China games market value chain perhaps most effectively demonstrated in distribution.
A dual investment shows that Tencent is hedging its big bets. If one of these platforms succeeds over the other, the company will remain strongly positioned. This move also squeezes the competition and reduces the possibility of other companies evolving to compete directly with Tencent. This 'domination' strategy is also reflected in Tencent’s games operation business. Take the Battle Royale genre for example, where the company plans to roll out two PC titles and three mobile titles in addition to extra expansion packs for legacy shooter games, in order to dominate this popular segment of the market, leaving little room for other entrants. It is clear that Tencent has fierce competition form Alibaba and NetEase across the Internet value-added service markets, so this aggressive investment strategy allows the company to stay several steps ahead of its competition.
For Huya and Douyu, both receiving investments from Tencent might limit the cannibalisation between the two live streaming platforms. Through 2017, the two platforms have competed for popular hosts, which has a limiting impact on their ability to attract loyal viewers in what is still a relatively fresh and rising market. More aligned strategies may benefit both platforms. Take the example of cooperation between Shanghai Oriental Pearl Group and both Microsoft and Sony for the local Chinese consoles games market. This has been a relatively successful model. Tencent’s investments might encourage the two leading platforms together to expand the user base of esports live streaming market and drive growth for the whole industry.