Tencent’s next big gaming bets draw on viral phenom ‘Palworld’

Figures of Palworld characters at Pocketpair's office in Tokyo, Japan. Indie PC title Palworld was crafted by a tiny studio with limited resources and became the world’s most downloaded new title upon its release in January. — Bloomberg

Tencent Holdings Ltd’s two most accomplished creative studios are making mobile games in the style of this year’s biggest viral hit, Palworld, in hopes of rebooting the company’s core business.

The teams at Timi and Lightspeed are both building games in the style of genre-blender Palworld, replete with pet companions and stylised violence, according to people familiar with the matter. The studios operate autonomously, but both seem to have landed on that new formula to seek out another Honor Of Kings that can power Tencent’s next wave of growth.

Tencent is betting on the China release of Nexon Co’s Dungeon & Fighter Mobile in coming months to fire up growth in the near term. But developing in-house hits is generally more profitable than adapting external content and could drive a flagging business that reported a 2% decline in games revenue in the holiday quarter.

The world’s biggest games publisher badly needs a mega-hit. It faces a price war in its cloud business and a stagnating software selection at home, where rival NetEase Inc’s Eggy Party has cornered the market for a new genre of party games.

To hasten a rebound, Tencent is now incubating multiple, competing projects to breed the best results, the people said, asking not to be named as the details are not public. The company’s two best-earning games and China’s perennial bestsellers, Honor Of Kings by Timi and Peacekeeper Elite by Lightspeed, were the product of fierce internal competition years ago.

Indie PC title Palworld was crafted by a tiny studio with limited resources and became the world’s most downloaded new title upon its release in January. Going after a game in that mould could be done comparatively quickly and yield instant monetisation, especially when backed by Tencent’s vast resources and promotional reach, the people said.

Tencent spokespeople did not respond to a request for comment.

“Tencent’s Dream Star had another disappointing week, with the game’s domestic iOS sales dipping below their historical low. The company’s China iOS game receipts dropped for the fourth consecutive week, normalizing at the pre-holiday level. NetEase’s weekly sales received a much-needed boost from Fantasy Westward Journey,” said Bloomberg Intelligence analysts Robert Lea and Jasmine Lyu.

The new games in development combine open-world, survival and crafting elements with the nurture of virtual pets, according to the people and a job post seen by Bloomberg News. These are some of the core features that made Palworld – referred to by fans as “Pokémon with guns” – a surprise sensation with a peak of over two million simultaneous players.

China’s most valuable company is also making moves to bolster its talent pool, including by picking up assets from ByteDance Ltd’s reduced gaming division.

Lightspeed has moved developers from existing games, including its lackluster shooter High Energy Heroes, into its Palworld-like project, said the people. Timi, known also for making Call Of Duty Mobile, is hiring everything from Unreal Engine programmers to 3D artists and combat designers for its project, according to the job post, which touts a “fantasy adventure world with cute pets”.

The Palworld mania hasn’t gone unnoticed by other games makers. NetEase showcased a pet system for its upcoming survival game Seven Days World in a new trailer. Many fans saw similarities between that gameplay, which includes an alpaca sidekick with a bow tie and a gun, and what they’ve seen in Palworld. – Bloomberg

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