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China tech

Tencent doubles down on cloud gaming services to fend off Alibaba

Chinese tech giant is aiming broad shift in focus from consumer to corporate clients

A players practices Tencent's mobile game "Arena of Valor" ahead of a competition in Tianjin, China.   © Getty Images

HONG KONG -- Gaming giant Tencent Holdings is providing rival companies with the tools to develop their own cloud-based games more easily, a move analysts say is aimed at snagging a bigger slice of China's cloud services market from archrival Alibaba Group Holding.

The Shenzhen-based gaming and social media heavyweight recently unveiled a cloud gaming framework that allows game companies to create new titles without having to hire an army of engineers to build the infrastructure from scratch.

Tencent, whose own gaming expertise has made it the undisputed leader in cloud gaming, says this will shorten the time needed to create a cloud-based game from months to a matter of days.

The move comes as Alibaba makes its own foray into cloud gaming, having teamed up with Intel last year to introduce its own cloud services specifically designed for gaming companies.

Cloud gaming -- in which game are streamed from servers in data centers, rather than downloaded onto smartphones or consoles -- has become increasingly popular in recent years. The global cloud gaming market hit $387 million last year, statistics from IHS Markit show, and that figure is expected to reach $2.5 billion by 2023.

Tencent is eyeing a slice of this fast-growing market, with a pilot cloud gaming service being rolled out earlier this year for Chinese players. But analysts say that the country's No. 1 game publisher can not afford to keep all of its know-how to itself as Alibaba -- its rival in everything from e-wallets to online advertising -- moves into one of Tencent's core areas.

"As China's biggest public cloud service provider, Alibaba's offering is no less attractive than Tencent," said Martin Bao, an analyst with ICBC International. The rivalry between Tencent and other gaming companies may also give users reason to favor Alibaba Cloud, he said.

"Tencent really has to make its cloud service more appealing" in face of Alibaba's efforts to lure away clients, Bao said, adding that the newly introduced cloud gaming solution could be viewed as a "friendly gesture" from Tencent to its fellow game developers.

Analysts say the offering is also Tencent's latest attempt to transform itself into "a digital assistant to all industries." The consumer-focused company announced in September that it is restructuring its business to tap corporate demand amid China's economic slowdown and weaker consumer sentiment.

While Tencent acknowledges that cloud gaming is still "in its infancy" and that no other game developers have yet adopted its new solution, company executives say they believe large-scale deployment is on the way.

"Since cloud gaming enables gamers to play on any device and therefore extends their playing time, I believe a lot of gaming companies will be willing to pay for that," Yang Yu, a Tencent executive, told reporters at the launch event earlier this month in Shanghai.

Kern Zhang, an analyst with App Annie, a market research firm specializing in online games, agrees.

Industry estimates show that the number of Chinese gamers has been growing at a single-digit rate since 2014 as the world's largest gaming market approaches its peak. The introduction of cloud gaming will "give a boost" to the sluggish industry, Zhang said, but "the majority of gaming companies in China either lack the know-how or financial means to develop cloud gaming on their own."

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