A weekend of video games once involved a couch, some controls and solitude. now that games are platforms they have transformed into communities. increased socialising means large amounts of data cross the servers of game companies, including chinese gaming giant tencent. this has not gone unnoticed by the us.
The trump administration has asked gaming companies including epic games and riot gamesto provide information about security protocols for handling personal data involving tencent. there will be a lot of it. social distancing has accelerated the adoption of virtual work meetings, concerts, weddings, graduation ceremonies and filming of late-night shows. on epics hit title fortnite, us venture capitalists have used virtual meetings to find deals. sensitive payments data can be exchanged.
If the us opted to retroactively review national security risks posed by tencents games and order an unwinding of its us investments, investors should brace themselves for huge disruptions.
Tencent is the worlds largest gaming company, with hundreds of investments globally. its stakes in the us, worth more than $20bn, are the most significant. these include riot games, the maker of the worlds most-played game league of legends, a 40 per cent stake in epic games and stakes in activision blizzard and glu mobile.
Unlike the previous us ban on tencents wechat social messenger, which affected less than 1 per cent of its users, nearly a tenth of revenues from games would be threatened by a restriction on us users and business. that could include bans on financial transactions in games or restrictions on us servers.
Online games, which account for about a third of tencents total sales, have been its main growth driver this year, recording 40 per cent sales growth in the second quarter and offsetting weakness in media advertising revenues.
In the worst-case scenario in which tencent was forced to divest its stakes, us game companies would scramble to find buyers while losing out on business in china. until global data privacy standards are agreed upon, everyone stands to lose.
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