An Activision display at the E3 Expo in the US. (Photo/CFP)
Pony Ma, CEO of Chinese internet giant Tencent, and Bobby Kotick, CEO of US-based video games company Activision Blizzard, have announced an alliance whereby the American firm will transfer the rights to its online game Call of Duty to Tencent for promotion in China, according to Guangzhou's 21st Century Business Herald.
Activision Blizzard has made heavy investment in a number of popular online games, including World of Warcraft, throughout the world. However, due to fierce competition in the industry, it has been experiencing difficulties lately.
Tencent boasts market value in excess of US$55 billion, compared with the US$13 billion of Activision. As of the end of 2011, Tencent had US$4.63 billion in cash reserves. In order to take over Activision, Tencent will have to swap shares or float bonds. Vivendi Universal — Activision Blizzard's parent company — is reportedly eager for cash and doesn't have an interest in Tencent stocks, listed on Hong Kong's stock market.
Tencent has been cautious about investing in foreign gaming firms. In 2008, it invested several millions of US dollars in Riot Games of the US, which was still in a fledging stage, and introduced its online games to China, with great success. In early 2011, Tencent acquired Riot Games for US$250 million.
The 21st Century Business Herald said that the acquisition of Activision Blizzard involves very high risks. Tencent's edge lies in its market share in China, where it boasts 750 million subscribers. However, the major markets of Activision are the US and Europe, where Tencent does not have a significant presence.
Though Tencent is investing in the US company, it is not expected to fully acquire it anytime in the near future.