Tencent has halted the development of a mobile game based on Square Enix’s Nier franchise, news report in Reuters indicated.
The decision to cancel the online gaming project, which had been in progress for nearly two years, due to challenges in devising a profitable monetization model amidst high development costs and complex franchise rights.
Tencent, headquartered in Shenzhen, faced difficulties translating successful console and PC games into mobile versions. The cancellation underscores a shift in the company’s decade-long strategy, which involved converting popular franchises into mobile games.
Both Tencent and Square Enix, the Tokyo-based developer behind the renowned “Final Fantasy” franchise, declined to comment.
Last year, Square Enix announced that “Nier: Automata,” the latest installment in the “Nier” series, had sold over 7.5 million copies since its 2017 release for computers and consoles.
Tencent Chairman Pony Ma recently stated that the gaming business, contributing over 30 percent of the company’s revenue, was under threat due to disappointing performances in some of its recent games.
The challenges faced by Tencent in the mobile gaming sector extend to the increasing costs associated with adapting famous computer and console games, known as intellectual property (IP) games.
High royalty fees, ranging from 15 percent to 20 percent of sales, along with additional costs such as the 30 percent cut from Apple’s App Store and expenses for marketing and user acquisition, result in slim profit margins.
As mobile game growth slows and development costs rise, Tencent has found pursuing many IP games too expensive. Tencent was only willing to pay royalty fees below 10 percent in recent negotiations with IP holders.
While Tencent had adapted popular games in previous years, such as “PlayerUnknown’s Battlegrounds” (PUBG) for mobile devices, it has struggled to replicate that success with new global hits from IP games. Competitors like miHoYo and NetEase have achieved massive success with their own IP games, adding pressure on Tencent.
Tencent aims to revitalize its fortunes with a slate of upcoming IP games for smartphones, scheduled for launch in 2024 or 2025. Some of these titles include “Delta Force,” “Need for Speed,” and “Assassin’s Creed.”
