Tencent recently cancelled a mobile game based on Square Enix’s popular “Nier” console franchise, according to Reuters.
The cancellation shows the challenges Tencent faces in adapting big-budget console and PC games into lucrative mobile titles.
Why Did Tencent Halt Its “Nier” Mobile Game?
Tencent had been developing the unannounced “Nier” mobile game for nearly two years before halting work in December 2023.
The company reportedly struggled to find a way to profitably monetize the game given the high development costs and expensive franchise rights.
“Nier: Automata,” the latest console game in the dystopian action-RPG series, has sold over 7.5 million copies since its 2017 release.
The cancelled game was reportedly far into development, with a playable demo showcasing robust gameplay and story elements.
Tencent allows employees to transfer to other divisions after cancelled projects, averting job losses.
Soaring Costs and Slim Margins
Tencent’s decision illustrates cracks in its longtime strategy of acquiring licenses to well-known game franchises and converting them into mobile hits.
The company has signed deals with many popular console and PC franchises in recent years, often outbidding rivals like NetEase.
But as the mobile games market matures, Tencent is finding more licensed titles unfeasible due to low profit margins.
Tencent must pay substantial royalties, reportedly 15-20% of sales, to license the intellectual property (IP) from Square Enix.
Additionally, Apple’s App Store takes a 30% revenue cut, marketing and user acquisition can cost 30-40%.
This leaves little room for profit, especially when development costs run high.
Tencent is reportedly only willing to pay single-digit royalties in recent licensing negotiations.
The Risks of Adapting Major Franchises to Mobile
In the past, Tencent scored big mobile successes with licensed Krafton’s titles like “PlayerUnknown’s Battlegrounds Mobile.”
But its last global mobile hit from a major licensed IP was “League of Legends: Wild Rift” in 2020, owned by Tencent’s Riot Games subsidiary.
Meanwhile, competitors like miHoYo and NetEase have found success with original mobile IPs like “Genshin Impact.”
Tencent has a slate of other licensed mobile games slated for 2024-2025, including “Delta Force,” “Need for Speed,” and “Assassin’s Creed.”
But reproducing past success is proving difficult.
At a recent press conference, Tencent’s chairman Pony Ma admitted the company’s gaming division faces challenges as some recent titles underperformed.
The “Nier” cancellation shows no franchise is immune to the market’s harsh realities.
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