People play computer games at an internet cafe in Fuyang, China’s Anhui province.
Lu Qijian | Visual China Group | Getty Images
LONDON – After decades of the U.S. and Japan dominating the gaming space, China’s influence is growing as its tech giants snap up gaming studios around the world.
Now, some experts think video games could look a little different in the coming years as a result.
Questions are being asked about whether the Chinese owners of U.S. and European studios will try to influence the games they make, or indeed use them to promote Chinese values. It remains to be seen but subtle changes could happen in the coming years, according to some experts.
“Some of these values might be different from what many expect,” British-Chinese writer Lu-Hai Liang told CNBC. “For example, Chinese female gamers are a massive market (500 million) and there have been many female-focused games and game studios that revel in this sector.”
Thomas David, a semiconductor engineer in the U.S., told CNBC that he thinks gamers could start to see more titles where the “good guy” is Chinese and the “bad guy” is from the West, for example.
China’s own gaming market is heavily regulated. It does not allow games that contain certain political views, gambling, gore, nudity and many other things to be released and sold in its home market. The movie industry is equally strict, with U.S. films having to be adapted before they can be released in China.
Exporting Chinese culture
“This area — how China could use games to export its culture — is incredibly important and largely missed,” Abishur Prakash, co-founder of the Center for Innovating the Future, told CNBC.
“China has several ways it can take its ideals to the world through games, and build a new kind of global power,” said Prakash. “One way is by banning certain topics, like Taiwan or human rights, from being discussed,” he said.
China could also establish “new centers within games that help showcase China’s power,” or use games to build its financial and commercial power, he said. “The next Chinese games might only allow users to purchase items in digital Yuan,” said Prakash. “Or, the Chinese games might have Chinese platforms, like TikTok, embedded into them.”
Others doubt that Chinese owners of Western gaming studios will try to change the games that get sold in the West.
“I would be very skeptical of something like that happening,” Louise Shorthouse, a senior games analyst at Ampere Analysis, told CNBC.
Steven Bailey, principal analyst at Omida, told CNBC that “Chinese companies have had involvement in various Western game companies and content for quite some time, and understand that successfully making games for the West will not be supported by such changes.”
He added: “Conversely, anyone releasing a game in China will need to adapt it for that market.”
Tencent’s sprawling investments
Tencent and NetEase have been snapping up stakes in gaming firms beyond China’s borders for years with little opposition.
“Tencent keeps buying the #1 game in every niche in North America and Europe,” wrote tech investor Rodolfo Rosini on Twitter in February. “This is important because games have cultural influence. And controlling the present and how reality is portrayed is very powerful.”
“If Tencent were to buy a stake in every leading newspaper and TV company people would be up in arms, there would be political hearings etc,” he added. “Instead they play the long game and they are buying the next generation’s media properties without any competition.”
For years, Hollywood has spread American values around the world and championed the country’s military might. Now it could be China’s turn to try to do the same, but through video games. However, while Hollywood often criticizes the U.S. and the actions of Washington D.C., China’s tech giants would not be able to say a bad word against Beijing, which exercises great control over all of its domestic enterprises.
China has more gamers than any other country, making it a highly lucrative market for those that can get in. One of the reasons that U.S. and European gaming firms take investment from Chinese companies is that they’re legally obliged to partner with a Chinese company before their game can be released in the country.
U.K.-headquartered Sumo became the latest gaming firm to sell to a Chinese tech behemoth on Monday, announcing a $1.26 billion deal with Tencent, which is the world’s largest video game publisher.
Neither company immediately responded when CNBC asked how, or indeed if, Tencent will influence the games that Sumo works on.
But Tencent has traditionally taken a hands off approach to its investments and acquisitions, according to Daniel Ahmad, senior analyst at Niko Partners.
“The company could also be an invaluable partner for Tencent as it looks to push into the AAA game space itself with its own projects,” said Ahmad.
“The deal would also help Sumo utilize Tencent’s expertise in regard to games development and publishing within China,” he added.
“Chinese game studios are looking to grow overseas and while organic growth is one option, acquisition allows these companies to build a presence much faster and with local talent,” said Ahmad.
Tencent also invested $150 million in Reddit in 2019, angering some Reddit users in the process who were concerned that the platform may experience more censorship. However, this does not appear to have happened in any significant way.
Amazon employees plan to walk off the job Wednesday in protest of the company’s recent return-to-office mandate, layoffs and its environmental record.
Approximately 1,900 employees worldwide are expected to walk out at 3 p.m. ET, with about 900 of those workers gathering outside the Spheres, the massive glass domes that anchor Amazon’s Seattle headquarters, according to employee groups behind the effort. The walkout is being organized in part by Amazon Employees for Climate Justice, an influential worker organization that has repeatedly pressed the e-retailer on its climate stance.
The group said employees are walking out to highlight a “lack of trust in company leadership’s decision making.” Amazon recently initiated the largest layoffs in its 29-year history, cutting 27,000 jobs across its cloud computing, advertising and retail divisions, among several others, since last fall. On May 1, the company ordered corporate employees to start working from the office at least three days a week, largely bringing an end to the remote work arrangements some employees had settled into during the coronavirus pandemic.
Amazon employees are walking off the job at a precarious time inside the company. Amazon just wrapped up its employee cuts, and it continues to reckon with the rough economy and slowing retail sales, leaving staffers on the edge that further layoffs could still be in store.
Employees had urged Amazon leadership to drop the return-to-office mandate and crafted a petition, addressed to CEO Andy Jassy and the S-team. Staffers said the policy “runs contrary” to Amazon’s positions on diversity and inclusion, affordable housing, sustainability, and focus on being the “Earth’s Best Employer.”
The backlash to the return-to-office mandate spilled over into an internal Slack channel, and employees created a group called Remote Advocacy to express their concerns.
Amazon employees who moved during the pandemic or were hired for a remote role have expressed concern about how the return-to-office policy will affect them, CNBC previously reported. Amazon’s head count ballooned over the last three years, and it hired more employees outside of its key tech hubs such as Seattle, New York and Northern California as it embraced a more distributed workforce.
The company had previously said it would leave it up to individual managers to decide what working arrangements worked best for their teams.
Amazon spokesperson Brad Glasser said in a statement that the company has so far been pleased with the results of its return-to-office push.
“There’s more energy, collaboration, and connections happening, and we’ve heard this from lots of employees and the businesses that surround our offices,” Glasser added. “We understand that it’s going to take time to adjust back to being in the office more and there are a lot of teams at the company working hard to make this transition as smooth as possible for employees.”
Amazon says it has 65,000 corporate and tech employees in the Puget Sound region and roughly 350,000 corporate and tech workers worldwide.
Employees are also using the walkout to draw attention to concerns that Amazon isn’t meeting its climate commitments. They pointed to Amazon’s most recent sustainability report, which showed its carbon emissions jumped 40% in 2021 from 2019, the year it unveiled its “Climate Pledge” plan. Staffers also highlighted a report last year by Reveal from the Center for Investigative Reporting that found the company undercounts its carbon footprint by only counting product carbon emissions from the use of Amazon-branded goods, and not those it buys from manufacturers and sells directly to the consumer.
Additionally, Amazon recently eliminated one of its climate goals, called Shipment Zero, wherein the company pledged to make half of all its shipments carbon neutral by 2030. Amazon said it would focus on its broader Climate Pledge, which includes a provision to reach net zero carbon emissions by 2040, a decade later than its original Shipment Zero commitment.
“Our goal is to change Amazon’s cost/benefit analysis on making harmful, unilateral decisions that are having an outsized impact on people of color, women, LGBTQ people, people with disabilities, and other vulnerable people,” the group said.
Glasser said Amazon continues to “push hard” to be net carbon zero across its business by 2040. The company remains on track to reach 100% renewable energy by 2025, he added.
“While we all would like to get there tomorrow, for companies like ours who consume a lot of power, and have very substantial transportation, packaging, and physical building assets, it’ll take time to accomplish,” Glasser said.
A Mastercard debit card from U.K. digital bank Monzo.
Monzo
Monzo on Wednesday said it hit profitability for the first time this year, in a major milestone for one of the U.K.’s most prominent digital banks.
In its annual report for the year ending February 2023, Monzo reported net operating income of £214.5 million ($266.1 million), almost doubling year-over-year from £114 million.
Losses at the bank nevertheless came in at a substantial £116.3 million — though this was slightly lower than the £119 million net loss Monzo reported in 2022.
Still, the company managed to reach profitability in the first two months of the year.
In its annual report, Chief Financial Officer James Davies said Monzo is “now a business with diverse and stabilising revenue from a large, and growing, personal and business customer base.”
“Profitability was always a choice as we balance continuing to invest in growth with profitability,” Monzo’s CEO, TS Anil, told CNBC in an interview. “We could have chosen to be profitable a few quarters ago.”
Monzo’s move into the black was largely thanks to a substantial increase in income from newer revenue lines, such as lending and subscriptions. Paid accounts now total 350,000.
Monzo declined to share a figure on how much of a profit it is making currently. The firm said it is on track to reach full-year profitability by the end of 2024.
Lending growth
Monzo’s strong revenue performance was driven by a bumper year for its lending business. This came against a backdrop of pain for U.K. consumers, who’re grappling with a harsh cost-of-living crisis as inflation soars.
Total lending volume reached £759.7 million, almost tripling year-on-year, while net interest income spiked by 382% to £164.2 million. That was as usage of overdrafts, unsecured personal loans, and the Monzo Flex buy now, pay later service grew sharply.
Yet credit losses also surged dramatically, as the bank set aside a mountain of funds to deal with a sharp climb in anticipated defaults. Credit losses swelled to £101.2 million, a more than sevenfold increase from £14 million in 2022.
It comes as consumers are increasingly turning to unsecured credit, such as credit cards and personal loans, to offset the impact of the rising cost of living. Research from consulting firm PwC indicates U.K. household debt exceeded £2 trillion for the first time in January.
Monzo’s boss disputed that the cost-of-living crisis had contributed to its revenue performance.
“The cost-of-living crisis was painful for everyone, but it really underscored the ways in which the Monzo product is incredibly powerful,” Anil told CNBC.
He added the growing cost of living impacted how people used Monzo products, with usage of its savings pots and budgeting tools rising.
Meanwhile, Monzo said it continues to work with the Financial Conduct Authority regulator over an ongoing inquiry into the company’s alleged breaches of anti-money laundering laws.
“We expect it to take time to resolve,” Monzo said. “This could have a negative impact on our financial position, but we won’t know when or what the outcome will be for some time.”
UK ‘not holding us back’
The fintech sector has experienced increasing scrutiny since it grew in prominence after the 2020 Covid outbreak.
Major digital banks, from Revolut to N26, are receiving heightened attention from regulators. Revolut is reportedly set to have its application for a banking license rejected by the Bank of England, according to the Telegraph.
A number of tech bosses have expressed doubts about the U.K.’s bid to become a global tech power on the back of notable setbacks, including Cambridge-based chip design firm Arm’s decision to list in New York rather than London.
Revolut CEO Nik Storonsky earlier this month said his firm had encountered “extreme bureaucracy” in its experience applying for a banking license in the U.K. and said he would never list in the country. Monzo co-founder Tom Blomfield, meanwhile, left London for San Francisco, citing a “much more accepting” environment for tech founders.
“From our perspective, this is a country where we got licensed, this is our home market; we’ve clearly learned this is where we can build a business of scale,” Monzo’s Anil said. “It’s not holding us back, I don’t think of it like that at all.”
Monzo now has 7.4 million customers in the U.K., making it the seventh-largest bank in the U.K. by client numbers. Total customer deposits now stand at £6 billion.
An aerial view of Tesla Shanghai Gigafactory on March 29, 2021 in Shanghai, China.
Xiaolu Chu | Getty Images News | Getty Images
From handshakes with Chinese officials to visits to China’s top ministries, Elon Musk’s visit to Beijing is putting the spotlight on China’s place in the global electric vehicle market.
The Tesla CEO’s visit to China is a “very important one” for him, said Anthony Sassine, senior investment strategist at investment manager Kraneshares.
China accounts for 50% of Tesla’s vehicle sales and 20% of its production capacity, and this visit would “set the story straight, to make sure he was on the same page as the [Chinese Communist Party],” Sassine told CNBC’s “Street Signs Asia.”
During Tesla’s earnings call in April, Musk identified U.S.-China tensions as a risk to the company’s projections for 2023.
Politics and macroeconomics
Sassine said the visit could also be seen as a “political statement” to China, where business leaders like Musk and JPMorgan chief Jamie Dimon are “telling politicians on both sides of the Pacific that business needs political stability.”
Politics is not the only reason. Sassine pointed out that the macro environment for EVs in China has been “tough,” and highlighted China’s ending of subsidies on new EV purchases, as well as rising interest rates in the U.S.
In the face of such conditions, companies have slashed prices to boost sales, and this will hurt their profits, he said.
The fact that Tesla was forced to slash prices in the first place shows how important the China market is to the U.S. electric carmaker, said Bill Russo, founder and CEO of strategy and investment advisory firm Automobility.
“It signals how important the China market is to defend and how important it is to your global system, you need the scale of China working for you,” he said on CNBC’s “Squawk Box Asia.”
Russo said Tesla needs the economies of scale that China provides to maintain its cost advantage globally, “but in order to sustain that, you need to make sure that you maintain your relevance here.”
It won’t be easy for Tesla, however. He noted that China the most competitive market for EVs, with Tesla competing with multiple local companies for supremacy. “Tesla is, unlike other places in the world, not the only top dog in this market,” he added.
When asked if Tesla’s strategy of cutting prices is appropriate, Russo said Tesla is “fighting with an older portfolio” — Model 3 was launched three years ago and Model Y two years ago.
Read more about electric vehicles from CNBC Pro
As such, it has had to use price to compete against Chinese EV companies that are introducing new models and to counter the aging of its product portfolio.
Russo pointed out that Chinese EV maker BYD sells extended range hybrids. This is “a weapon that Tesla doesn’t have,” he said adding that BYD also outsells Tesla two to one in the pure battery electric business.
As such, Tesla has to rely on pricing to maintain its competitiveness, unlike other places around the world where it doesn’t face such stiff competition.
“The problem is Tesla everywhere else in the world represents ‘premium EV,’ but in order to fight the battle here in China, you’ve got to wage a price war,” he said.
“Generally price wars are won by companies who can outprice you and right now Tesla is not the lowest price competitor in the market.”