Tencent Holdings Limited has reportedly been in negotiations with the Committee on Foreign Investment in the United States (CFIUS) since the second half of 2020 in an attempt to keep hold of two key parts of their business. The company aims to retain ownership of Riot Games and Epic Games, two American-based publishers Tencent has a controlling interest in, amid concerns from the US government over sharing of user data by Chinese firms.
The company has been in danger of losing control of the publishers due to concerns in the US over handling of user data since at least 2020, In part due to Tencent’s ties to the Chinese government. What measures Tencent has been negotiating towards were not divulged at this time, and there is no indication whether or not the outcome is expected to be positive for the Chinese firm with the only confirmed information at this point being the existence of negotiations.
If they do retain control, it would most likely be with stipulations that limit or entirely prevent influence from the Chinese side being exerted over the American arms of their operation. There have been suggestions the reason for the delay is due to a failure to fill certain key roles at the CFIUS by the current administration, with the role of Chief Technology Officer, a key part of the CFIUS board currently vacant, although this seems contradictory to reports of ongoing negotiations..
Chinese companies under US government pressure over data sharing
Recent reports from America have alleged that Chinese firms are complicit in sharing user data with the Chinese government, and a 2020 report from a former CIA official alleged that the Chinese Ministry of Security provided funding for Tencent in their early years. While it is likely the recent change of administration may have eased relationships between China and the US, it was only a few months ago President Trump unsuccessfully attempted to ban Tencent-owned WeChat, calling it a threat to national security.
Even with the apparently softening of tone from the American side, it is clear there are still going to be hurdles for Tencent if they wish to retain control of the two publishing giants. They currently own 40% of Epic Games, publishers of Fortnite, as well as having complete control of Riot Games since 2015, having paid a sum of just $400m for 93% of the company in 2011.
2020 saw Tencent report a $23bn profit, with League of Legends alone generating $1.75bn in revenue for the company and Epic generating over $1.5bn in profit, making it clear why the company would prefer not to sell even if it means ringfencing parts of their operation.
With the bans for other Chinese firms such as Huawei in multiple nations, including the UK, the Netherlands, and the US, this case remains part of a larger conversation over government involvement in technology that could have far-reaching implications for gamers.