Tencent becomes Netmarble’s second largest shareholder

[Photo by Yonhap]

Chinese gaming giant Tencent Holdings is expanding its presence in South Korea by investing in Korean game companies via its vast financial resources.

Multiple game industry sources said on Thursday that Tencent recently became the second-largest shareholder of Netmarble Corp., the second-largest Korean game company by market capitalization. Following the sale of a 5 percent stake by CJ CNM Corp., the previous second-largest shareholder, Tencent now holds the second-largest number of shares after Netmarble Chairman Bang Jun-hyuk.

Tencent also holds a 13.87 percent stake in Krafton Inc., the leading game company in Korea, making it the second-largest shareholder. It has also been steadily increasing its share in Shift Up Co., which recently became the third-largest Korean game company by market capitalization upon listing, over the years. Tencent now holds a 35.03 percent stake in Shift Up, becoming the second-largest shareholder after the founder and CEO Kim Hyung-tae (39.05 percent).

The Chinese company had already acquired shares in Krafton and Shift Up before they went public. It is known to have realized significant valuation gains, and holds a 3.89 percent stake in Kakao Games Corp., making it a key shareholder.

In total, Tencent is a major shareholder in four out of the top five Korean game companies and is reportedly considering additional investments in Korean game publishers. It is investing in Korean game companies to secure intellectual property and core development talent, while solidifying its global market dominance by leveraging Korean gaming resources.

Previously a small-to-medium player in the gaming industry, Tencent expanded its business by publishing Korean game IPs. It earns trillions of won annually from distribution Korean games like Nexon’s Neople’s “Dungeon & Fighter” and Smilegate’s “Crossfire” in China.

According to market research firm Sensor Tower, nearly 15 percent of Tencent’s mobile game revenue in the first half of 2024 came from Korean games. As the Korean gaming industry focuses on penetrating the Chinese market, Tencent’s role as a distributor has become even more prominent in China, where foreign companies can only enter the market through distribution agreements with local companies.

Companies like NCSoft, Pearl Abyss, Nexon, and Netmarble have currently either released games or are planning new releases with Tencent as their local distributor, thus giving the Chinese company the distribution rights for major Korean games in China.

“Due to the difficulty and complexity of market entry procedures in China, including obtaining a license, and the strong influence of the publisher (Tencent), Korean game companies have no choice but to be cautious,” an industry insider said.

Tencent is currently regarded as the world’s largest gaming company in terms of revenue, IP holdings, and development talent. Its gaming division alone reported revenue of 179.9 billion yuan ($24.8 billion) in 2023, with international revenue making up 30 percent of the total, up from the previous year. The company has also been reinvesting the profits from its gaming business into acquisitions, game development, and talent acquisition.

Tencent acquired 100 percent of Riot Games, the developer of “League of Legends” in 2015, for example, and also began direct entry into the Korean market. Its global brand Level Infinite officially launched the global version of its hit game, “Honor of Kings,” in Korea in June 2024.