(Bloomberg) -- A decade ago, Tencent Holdings Ltd.’s MoreFun Studios was on the verge of collapse. Now the 1,600-strong operation and its leader Enzo Zhang are at the heart of the Chinese entertainment company’s ambitions to craft international hits.
Long overshadowed by Tencent’s bigger teams at Timi (Honor of Kings) and LightSpeed (PUBG Mobile), MoreFun in November released Arena Breakout: Infinite — Tencent’s newest Call of Duty-style PC shooter, targeting a genre that typically tops spending charts. It’s one of a handful of global titles the company hopes will anchor its most critical initiative: creating “evergreen” franchises that can generate sales over many years. Tencent, which is eager to rejuvenate its lineup and topline growth, will be counting also on MoreFun’s One Piece Mobile next week, an arcade-style fighter based on the bestselling anime.
It’s a high point in the roller-coaster career of 42-year-old Zhang. The studio chief created 2010’s Roco Kingdom just five years into his Tencent tenure, his first job after completing a law degree. That web-based game was a smash hit that spawned books, movies and even a theater production. Tencent entrusted him with his own studio to run, an unheard-of ascent for a novice producer.
But MoreFun was ill-prepared for the iPhone and other smartphones taking over and sidelining web games like Roco. Zhang recalls fighting to protect staff from cuts during the lean years, and it was only during the pandemic, when sales in MoreFun’s aging Naruto Mobile surprisingly jumped, that the pressure eased. Then the mobile shooter Arena Breakout emerged in 2022, garnering more than 100 million global signups.
“MoreFun avoided the emergency room. And now we’re even out of outpatient care,” said Zhang, wearing a black baseball cap and Naruto T-shirt. “Web games gave us our start, but we later paid a high price.”
MoreFun’s rebound gives a glimpse into how Tencent seeds growth at its core games division — at $25 billion in annual sales, the world’s largest — despite a global industry recession and Chinese economic downturn. Tencent has in 2024 sharply outperformed rivals like Alibaba Group Holding Ltd. and NetEase Inc., though that’s partly because many of its rivals are considered more vulnerable to consumer shocks.
The global games industry is estimated to have laid off at least 14,000 workers this year as gamers gravitate toward playing fewer games for longer and consumption plateaus, trends that forced China’s most valuable company to pursue cost cuts and higher-margin revenue. Even the development teams behind Honor of Kings and Peacekeeper Elite — Tencent’s two biggest cash cows — went through adjustments around the start of the year, which execs deemed necessary to freshen up ideas.
“MoreFun has the DNA to go really deep in certain domains, which made it harder to transition when the winds of change were blowing,” said Mei Bo, a former Riot Games producer who’s now a consultant. “But I’m not surprised to see their comeback, leveraging years of expertise in the shooting genre.”
For now, MoreFun remains far smaller than better-known Timi or LightSpeed. But the studio, situated a few blocks from the embracing towers that are Tencent’s headquarters, is getting more attention and backing. By both sales and staff, MoreFun has been the company’s fastest-growing studio over the past five years. Tencent has more than doubled MoreFun’s headcount since 2020, when Arena Breakout began production. Billionaire founder Pony Ma himself is a player and bemoaned the lengthy tutorials preventing him from shooting stuff.
“He called it anti-humanity,” Zhang recalls. “Shouldn’t a shooting game just let players fire some shots, rather than giving them a big lecture?”
Zhang and his top lieutenants still bear the emotional scars of being almost wiped out by the mobile revolution. But they stuck with it. Remarkably, MoreFun has remained profitable for its entire 14-year history.
“Step one for any product is always to stay alive,” said Trance Zhang, one of MoreFun’s longest-tenured producers, who oversees its fighter genre. “Then we can talk about how to thrive.”
MoreFun has a full pipeline of potentially splashy debuts for the coming year. Building on Naruto Mobile, its nine-year-old anime-inspired hit that pulls in at least $10 million in revenue each month, the studio is hoping to replicate the success with the One Piece franchise. Beyond that, it’s crafting a pet-rearing game, in the style of Pokemon and Palworld, and another fighting sim for the latter half of 2025.
Infinite is MoreFun’s first attempt at a PC title, and with that, studio chief Zhang is leaping into one of gaming’s most lucrative genres. His parent firm, known for its so-called horse race culture that encourages competition among internal teams, is okay with publishing dueling games. Enzo Zhang says he’s also comfortable about going up against Delta Force, another big-budget shooter just rolled out by his colleagues at Timi. Unlike its bigger rivals, Infinite focuses on smaller skirmishes where players prioritize escape and loot over kills.
Arena Breakout: Infinite saw hundreds of thousands of daily players in its first week, and the game has yet to launch on PC platform Steam, where it’s garnered two million signups. MoreFun aims to grow the daily users to several million in the next one to two years. Monetizing those regular users got off to a rough start, with many complaining about feeling forced to acquire an add-on that costs as much as $10 per month. But Tencent has specialized in finding the right formula to convert in-game cosmetics and power-ups into long-running revenue streams.
The two Zhangs credit Tencent for leaving them to focus on content creation and setting aside concerns about how to make money. “Tencent is a company with great patience,” Enzo said. “Its ample cash allows us room for trial and error.” That’s freed Enzo to focus on the nitty gritty details of game design — and in July, when the mastermind behind Arena Breakout left the studio, he stepped in to fill the lead producer role. It’s just another aspect of carrying the burden of helping drive Tencent’s next stage of growth.
With assistance by Zheping Huang
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