Twitch is blocked by China’s Great Firewall

The Amazon-owned game streaming platform Twitch confirmed on Friday that it became inaccessible from China, the latest of a string of popular services banned from the world’s largest internet market.

That China has banned another internet site can hardly hit the headlines nowadays. On the contrary, often it is the clandestine or not so clandestine efforts from those blocked to re-enter China that are making the news. As a matter of fact, among the top 10 most visited websites based on the traffic data from the analytics company Alexa Internet (not the personal assistant from Amazon, but an Amazon subsidiary nonetheless), four are entirely blocked (Google, YouTube, Facebook, Twitter), one is partially blocked (Wikipedia), one is accessible (Yahoo), the rest are China-based.

The reason that the twist on Twitch has caught media attention is that it has suddenly gained popularity in the last month, not the least because e-sports were included in the recent Asian Games in Jakarta, a regional multi-sport event with the number of competing athletes next only to the Olympics. Following the Games, Twitch’s iOS app climbed to the 3rd position in Apple’s App Store in China, before it was quietly taken down, presumably another measure to comply with local regulations.

E-sports have been attracting stronger following in recent years, and special events have taken place in different parts of the world, where spectators would travel to follow the stars they have followed on platforms like Twitch. However the Asian Games was the first time e-sports were sharing the stage with other “real” sports.

China’s attitude towards e-sports, and the games industry in general is mixed. It is the world’s largest video game market, host to the world’s largest publisher (Tencent), and has a total number of video game players larger than the total population of the United States. But it also banned game consoles sales for a number of years, and its official media has also repeatedly underscored the “harm” video games can do to young people’s mental development. Despite the extensive coverage of the Asian Games, where China dominated the medal table, the state-owned China Central Television (innocuously abbreviated as “CCTV”) did not cover the e-sports section at all, leading to the sports channel’s chief producer alluding to this gap in his latest column (in Chinese).

“I can’t say I am surprised by the crack down on Twitch,” said Nitesh Patel, director of Wireless Media Strategies of the research firm Strategy Analytics. Live video streaming, including game steaming, has taken China by storm in recent years. Large amounts of money and time have been spent on following streaming stars. “The authorities are concerned about gaming addiction and, as a consequence, players like Tencent have implemented features to limit the time children spend playing addictive titles like Honor of Kings. The recent reported spike in use in Twitch may have caused some concern among authorities and they have moved to pull the plug before momentum continued,” added Patel.

Likely to benefit from the ban will be local game streaming platforms, for instance Douyu, Huya, Panda TV, similar to WeChat benefiting from the ban on WhatsApp, Badu on the ban of Google in the past.

Fortnite’s Google Play bypass could be free money for Tencent

Epic Games has taken the somewhat unusual move of distributing the mobile-version of its popular Fortnite title through its own website, potentially saving up to $50 million according to app economy analyst firm State Tower.

Few developers will have the option to bypass the powerful Google Play distribution network, though such is the popularity of Fortnite, Epic Games could make some serious savings by avoiding the platform fees. Fortnite Battle Royale is currently in beta mode on Android, beginning with selected Samsung Galaxy devices, though it has grossed more than $180 million having launched on iOS in March 15. With Android eclipsing the iOS user base by some distance, there is some serious cash to be made.

“We expect that once Fortnite rolls out to the full complement of supported Android devices, its launch revenue on the platform will closely resemble the first several months of App Store player spending,” said Randy Nelson, Head of Mobile Insights at State Tower.

“There is a chance that it will even surpass what we’ve witnessed thus far, based on factors such as the game’s increasing popularity, the growing impact of each new season’s Battle Pass on revenue (these release every 10 weeks), and the potential for players in countries where both Google Play and the iOS version are not available to directly download the APK and spend in the game.”

Such is the influence and power of Google Play, few companies would even consider distributing app’s through their own channel. Due to sheer volume and variety of downloadable games on mobile platforms, cutting through the noise is almost impossible. That said, Fortnite is one of the titles in the small percentage who are broadly memorable and recognisable, alongside the likes of Angry Birds or Pokémon Go. With Google collecting between 15-30% of app and in-app purchase revenues, there is certainly a business case for owning the distribution channels, even if it is risky.

Google and Apple will want to maintain control of this global (aside from China where other app stores rule the roost) duopoly, though if Epic Games could prove there are other options it could effectively be free money for those will a loyal-enough fans, or creative-enough marketers. For Tencent, owner of Epic Games, this will certainly be an interesting exercise.

The online games business unit of Tencent is a minor, but notable one. Mobile gaming was a small percentage of the overall $11.6 billion revenues generated in the first quarter, but global trends indicate there is room for growth. Fortnite is one of the larger titles in Tencent’s broader stable, though Honour of Kings is currently the highest grossing smart phone game in China’s iOS Top Grossing Chart and QQ Speed is another hugely popular game. Should Epic Games be able to prove it can reach customers, and at least maintain revenues/profitability, through its own channels, Tencent could start saving a couple of hundred million a year.

Google will of course do everything in its power to ensure this is an isolated case. The last thing it needs is major titles deserting its app market, though with Fortnite there might be little it can do. Lawyers might be called, strategies might be devised, though we suspect a US company trying to put the legal hammer down on a Chinese company in today’s climate of Trump-inspired tension will be somewhat of a struggle.

Should Epic Games prove there is life without Google, the ripples in the app economy might start turning into waves before; everyone likes saving cash.

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LoRa bags Tencent as backer

Chinese internet giant Tencent is the latest company to join the LoRa Alliance, adding credibility to the technology which has perhaps been viewed as substandard to NB-IoT.

Tencent said in a statement it has been investing in LoRaWAN, most notably in building a LoRaWAN network in Shenzhen with local partners, but also in providing  device-edge-cloud LoRaWAN solutions on its network for a wide variety of IoT application and end users, such as government public services.

“It is clear that LPWANs are essential for the IoT technology and applications, and the market is quickly growing in China, especially in areas like government public services, industry manufacturing,

personal IoT devices, etc,” said Hongtao Bie, Vice President of Tencent Technologies.

“LoRaWAN has seen rapid growth, and we feel it is highly complementary to NB-IoT in the LPWAN market. Joining the LoRa Alliance will allow us to influence LoRaWAN development, advance IoT adoption, and strengthen our cloud business by building close partnerships with other LoRaWAN vendors around the world.”

The pros and cons of LoRa in comparison to Sigfox and NB-IoT have been much debated over the last few years, though it does seem NB-IoT is winning out. With the majority of telcos throwing weight behind NB-IoT, the influence of non-cellular technologies is starting to be diluted. There will of course be benefits with technologies such as LoRa, campus connectivity for unlicensed spectrum is one, but as data usage ramps up you can see why the telcos are nervous.

The danger lies with mission critical. LoRa might have a cost advantage, but without the licensed spectrum option, the telcos are justifiably tentative considering the potential damage to already battered spreadsheets. There are of course examples of telcos marrying the two technologies, Orange is producing some interesting initiatives in this area, though LoRa is not necessarily making the impact it had in mind. Maybe it is because it is a proprietary technology?

There will of course be use cases for the technology, and being able to throw around the Tencent logo as a supporter will also help.

Is mobile payment going too far when cash has become unacceptable?

When mobile payment with smartphones has become the means of choice at retail outlets, the central bank of China needed to remind businesses they should not reject cash payment.

Once upon a time, people said “cash is king”. Not anymore.

In most retail outlets in China, mobile payment with smartphone apps WeChat Pay (of Tencent) and Alipay (of Alibaba) has become the de facto option. Customers with credit or debit cards only, including the cards on UnionPay (China’s clearing platform), are sometimes in bad luck. It turns out even cash payment may not go all the way, which prompted the central bank, People’s Bank of China, to issue a warning notice to the retailers that rejecting cash is against the law.

This fast and massive move towards mobile apps based payment dwarves the slow uptake of NFC based contactless payment championed by the technology companies. This is despite the tech heavy weights Apple and Google having been supporting NFC payment since 2014. The enthusiasm in which consumers and businesses embrace it, even with the clout of Apple and Google thrown behind it, has been underwhelming.

According to the research firm Berg Insight, the total number of NFC enabled POS terminals grew by almost 100% in 2017 to reach 54.5 million, most actively in North America and Western Europe. Only about 30 million of the terminals have been activated.

Apple has refused to disclose user numbers or transaction values related to Apple Pay, although different research has put the number of users who could pay with Apple Pay and who actually did it at about 3%. The uptake of Android Pay is no better. The comparable adoption rate is estimated at about 1%.

It is safe to say Apple CEO Tim Cook’s ambition to replace wallets with Apple Pay has not gone too smoothly. Mr. Cook himself was reported to have been rejected to pay for his coffee with Apple Pay by a barista, reported The Information.

In contrast, WeChat Pay and Alipay did not only handle over 90% of China’s $16 trillion mobile payment transactions in 2017, they are also actively expanding overseas. An agreement was signed last week with the Kenya based Equity Bank to bring the services to eastern Africa including Uganda, Tanzania, Democratic Republic of the Congo, South Sudan, and Rwanda, in addition to Kenya. With a smartphone penetration level much lower than in China, we do not believe retailers in Africa will rush to refuse cash payment though.

Tencent is aiming to do a Spotify with its entertainment and music business

The China based internet company Tencent, listed on the HKSE, is planning to spin off its music and entertainment subsidiary and list it separately on an exchange in the US.

The chairman of Tencent, Ma Huateng, also known as Pony Ma, made the announcement on Sunday 8 July, one day before Xiaomi’s trading started on the HKSE. Despite the initial price was set at the bottom end of the estimated range, Xiaomi’s share price still closed the day 1.2 percent lower than its opening price, having recovered from a heavy loss of close to 6 percent earlier in the day.

In an interesting twist, Xiaomi’s CEO Lei Jun felt the share price was depressed by the on-going trade disputes between the US and China, when he spoke to the CNN. Meanwhile, the company’s President and Co-Founder Lin Bin told CNBC that the trade war is not a major concern “as Xiaomi had not done much business in the U.S.”

Although Xiaomi is a profitable business, its thin margin (capped at 5 percent by its owner on its hardware business, which accounted for roughly 90 percent of the whole business) made investors deem the price too high.

In comparison, the global leader in streaming music, Spotify, launched its IPO in April this year on NYSE. The price rose by 13 percent on its opening day, rising to $149.01 from the initial offering of $132, despite Spotify being a loss-making company. It was traded at $175.70 when the market closed on Friday 6 July.

We can only wait for Tencent to disclose the profit and loss of its Music and Entertainment group in the run-up to the IPO, but the group, which gets all its business from China, has reported healthy growths. Its paid subscriptions, mainly for video and music, grew by 24 percent to 147 million during the first quarter of 2018, and its total video revenues grew by 85 percent year on year.

The limited appetite on the Hong Kong market, especially when the channel to China-based investors, the instrument called CDR, is hard to come by, in contrast to the enthusiasm to invest in the future on the US market, may have helped tilt the decision by the Tencent board to go for the US stock market.

Nokia ties the knot with Tencent for 5G R&D

Nokia has entered into a partnership with China’s internet giant Tencent to undertake 5G related R&D for webscale companies.

An MOU was signed in MWC Asia in Shanghai between the two companies to set up a full-fledged 5G lab in Shenzhen, China, where Tencent’s headquarters are. WeChat, the crown jewel of Tencent’s plethora of apps and services, is more a platform at the centre of an ecosystem than a standalone app. It has more than 1 billion monthly active users who make payments, hail car rides, order takeaway foods, among other things, as well as messaging, sharing pictures and videos, and networking that WeChat started out to do.

As Tencent further diversifies itself to other industries, including its recent entry into connected cars and autonomous driving, 5G’s promised capabilities, in particular edge-computing to vast reduce latency will be critical. By entering into a partnership with Nokia, which is strong in R&D, Tencent has a chance to influence how the 5G technologies can be applied to certain use cases. No wonder then the focus of the lab will be on selected verticals that Tencent has special interest in, with transportation, energy, entertainment, etc. being highlighted.

It is also a smart move by Nokia, who desperately needs to find new growth opportunities than selling more network gears to telecom operators, in particular when operators in Europe, Nokia’s traditional markets, are more cautious in rushing into 5G than their counterparts in North America and Asia.

As Nokia told Telecoms.com’s Jamie Davies, interest in 5G in Asia is more on the ways to scalability. This is an ideal case to test scalability. While it is an internet giant in every sense, Tencent is highly concentrated in China. For Nokia this would be a controlled experiment and would be valuable when it knocks on the doors of other local heavyweights like Alibaba, as well the truly global webscale companies like Google and Facebook.

Tencent goes big with 56% revenue growth

Total revenue up 56% and a 61% year-on-year increase in operating profit, but share price down 2% across the day. Some people are just never happy.

While the short-term disappointment of the market might be a bit of a dampener for the Tencent management team, it certainly does have a lot to be happy about. Aside from some notable increases in total revenues and operating profit, the annual financial report also demonstrated a 74% year-on-year increase in profit attributable to shareholders. The last three months has also seen a 14.7% increase in share price, a number which increases to 106% over the last twelve months. There certainly is some good work going on here.

“During 2017 and continuing in 2018, Tencent made important strategic moves that reinforced our leadership,” said Ma Huateng, CEO of Tencent.

“Our streaming video service became the China market leader with the most mobile daily active users and monthly subscriptions. Our Weixin Mini Program platform rapidly expanded its developer base and user adoption. Our QQ Speed Mobile racing game and PUBG: Exciting Battleground shooter game achieved absolute leadership in, and grew the audiences of, their respective genres.

“Looking forward, we are substantially increasing our investment in areas including video, payment, cloud, AI technologies and smart retail, which will impact our near term earnings but which we believe can generate long term value and growth opportunities.”

Looking at the individual business units for the final quarter of the year, Value Added Services (VAS) business increased by 37%, online games revenues increased by 32%, revenues from online advertising business increased by 49%, while other businesses increased revenues by 121%. The other businesses section mainly compromises of payment related and cloud services.

In terms of social media, perhaps the area Tencent is most well-known for, the combined Weixin and WeChat user numbers exceeded 1 billion accounts. Although the vast majority of this user base will be from its domestic Chinese market, Tencent must be keeping a wary eye on the international space wondering whether there is an opportunity to grow.

With Facebook being hit by privacy scandals and Twitter being accused of harbouring terrorists, the grip on the digital world might be loosening slightly. As public opinion towards the social media giants is turning sour and suspicious, there could be room for a new and refreshing brand to capture the hearts of the online-hungry.

While the future prospects of Tencent does look positive, shareholders were perhaps put off by the promise of lower profitability in the future. Tencent has promised to continue investing heavily in areas such as artificial intelligence to remain relevant in the world of tomorrow, but this might be the reason for the 2% decline in share price.

Spotify looks east with Tencent umbilicus

Music streaming service Spotify has made a clear statement of geographical intent by entering into an equity swap with Chinese internet giant Tencent.

Specifically Spotify is doing business with Tencent Music Entertainment and in its announcement it referred to the two companies as ‘the two most popular music streaming platforms in the world.’ TME runs QQMusic and KuGou, which apparently have a combined monthly user base of 450 million users. The last time Spotify revealed its user numbers they stood at 140 million, with 60 million subscribers, but it has global reach.

The companies have announced they will acquire shares in each other but the only details offered is that they will amount to minority stakes. So somewhere between 0.000000000001% and 49.9999999999999%. Tencent is also going to buy another tranche of Spotify shares just because it can.

“Spotify and Tencent Music Entertainment see significant opportunities in the global music streaming market for all our users, artists, music and business partners,” said Daniel Ek, CEO and Founder of Spotify. “This transaction will allow both companies to benefit from the global growth of music streaming.”

“We are excited to embark on this partnership with the largest music streaming platform in the world,” said Cussion Pang, CEO of TME. “TME and Spotify will work together to explore collaboration opportunities, with a common objective to foster a vibrant music ecosystem that benefits users, artists and content owners.”

“We are delighted to facilitate this strategic collaboration between the two largest digital music platforms in the world,” said Martin Lau, Tencent President. “Both of us share the same commitment to bringing music and superior entertainment experiences to music lovers, and to expanding the global digital music market for artists and content partners.”

Spotify is expected to have its IPO next year and being so intimately joined to such a big, cash rich company will probably reassure prospective investors about its long-term future. Furthermore, since that future will chiefly involve direct competition with US tech giants such as Apple and Google, this marks an intriguing moment in the balance of economic power between east and west.