Tencent shuts down Penguin Esports, its rival to Amazon’s Twitch, as China’s crackdown on technology continues

the streaming platform, Penguin Esports, announced Thursday that it would end all services on June 7, citing changes to its “business development strategy”.

Penguin Esports was founded in 2016 by Tencent and mainly focuses on live streaming of games including broadcasts of esports leagues equivalent to Amazon AMZNthe Twitch service. It owns streaming rights to several of Tencent’s popular games in the country such as Honor of Kings and League of Legends.
But Penguin Esports has not come close to becoming a dominant market player. Nasdaq-listed Huya HUJA and douyu DOYU are currently leading China’s video game streaming wars, accounting for more than 70% of the market, according to the country’s antitrust regulator. Tencent also has a significant stake in Huya and Douyu separately.

In 2020, Tencent planned to sell Penguin Esports to Douyu for $500 million and then merge Douyu and Huya into a new company that would streamline its shares in the platforms. The deal was valued at nearly $6 billion based on each company’s stock prices at the time.

But the merger agreement was blocked by the Chinese antitrust regulator in 2021. The State Administration of Market Regulation said in a statement at the time that the merger of Douyu and Huya would strengthen Tencent’s dominance in the video game streaming market, giving the company too much market power and potentially deterring fair competition.
Penguin Esports’ shutdown came as an unprecedented government crackdown severely slowed revenue growth at the nation’s most powerful internet companies, putting pressure on them to lay off employees and look for ways to lower operating costs. Since late 2020, Chinese authorities have launched a sweeping campaign in an effort to curb major players in industries ranging from technology and finance to gaming, entertainment and private education.
Last month, Tencent reported the slowest revenue growth since its listing in 2004.

Shutting down the video game streaming service too comes amid an intensification of action against tax evasion in the country’s thriving live streaming sector.

Last month, the state tax agency said it will require online platforms to report live streamers’ personal data and earnings every six months.

Authorities have already attacked some live streaming stars for tax evasion, such as internet celebrity Viya, who was fined 1.34 billion yuan ($211 million) in December for concealing personal income.
Tencent co-founder Pony Ma and President Martin Lau said in a March earnings call that the new regulations have created “fundamental changes and challenges” in the Internet industry, hurting Tencent’s financial performance.

The company would “proactively embrace change” to better align with a new industry paradigm, Lau said.

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