ByteDance is mostly withdrawing from the games market

ByteDance has decided to pivot away from its gaming strategy. The company recently announced that it will shut down its (in-development) mid(core) games and sell some of its studios.

According to a ByteDance spokesperson, “We regularly review our businesses and make adjustments to center on long-term growth areas. Following a recent review, we’ve made the difficult decision to restructure our gaming business.”

After acquiring two developers in 2019, ByteDance made its true gaming ambitions known in 2021. That year, ByteDance acquired Moonton, the developer behind the core competitive mobile game Mobile Legends: Bang Bang.

ByteDance also previously ramped up its game-related talent acquisition efforts in an attempt to enter the games market and take on its biggest competitor, fellow tech giant Tencent.

The company’s gaming vertical comprises two main brands: Nuverse for (mid)core games and Ohayoo for (hyper)casual titles. ByteDance’s recent strategic shift will only impact Nuverse, it seems, and rumors have circulated suggesting that ByteDance hopes to sell Moonton.

However, Moonton would likely sell at a far lower price than the $4 billion ByteDance initially paid for it just two years ago. If the company does indeed sell Moonton, we believe ByteDance will be pleased to cut its losses.

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So, after a few years of tinkering, it seems that ByteDance’s non-casual gaming experiments haven't paid off. ByteDance’s CEO commented that the decision to step back from gaming is due to the vertical’s low return on investment for the company. TikTok and Douyin’s returns are consistently higher and more sustainable.

To make matters trickier for ByteDance’s position in games, the global economy is in dire straits compared to 2020, investing and borrowing aren’t as “cheap” as they once were, and the mobile games market faces a much stricter user acquisition and advertising landscape.

This strategic restructuring will also displace hundreds of employees, adding to the troubling trend of gaming industry layoffs in 2023.

Going a bit further, ByteDance’s shift away from games might also explain Pico’s decision to fire a few hundred employees earlier in November. Pico, owned by ByteDance as of three years ago, is a VR headset company that competes directly with Meta.

Like many companies before it, ByteDance may have overestimated the global games market, especially with the increased gaming engagement and investments during lockdowns.

While there are other factors at play, this overestimation is one of the main reasons so many companies —from Epic Games to Bungie—have had mass layoffs this year, despite the market performing so well overall.

Many companies thought that the engagement and revenue growth of the games market would continue indefinitely. Of course, the market is growing, but not at the astronomical rates seen in 2020 and 2021. This diminished growth has pushed big tech companies to refocus away from underperforming verticals, and unfortunately, gaming seems to be one of them.

To reiterate, the market is still performing admirably, meaning that these strategic pivots don’t really reflect the market so much as an overestimation of its growth after the COVID-19 boom.

Many tech companies are following Meta’s lead in calling 2023 “the year of efficiency.” At the start of the year, Mark Zuckerberg stated, “Our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization.”

It’s definitely a positive spin, and we’ll be curious to see how non-endemic tech giants approach gaming in 2024 and beyond.

Despite some reshuffling from big tech companies, the AAA games market is continuing to perform well. Want to learn more about what’s driving the global games market? For a deep dive into revenue and player data, get started with the free 2023 Global Games Market Report.

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About the writer:?

Mingxuan (Frank) Chen began his career in games as Newzoo’s market analysis intern specializing in the Chinese market. As a passionate games scholar and enthusiast, Frank quickly became integral to our Market Analysis and Consulting team, contributing to market sizing models and custom projects. Frank brings his background in economics and finance to his work in games, helping industry players to better understand what moves the market and why. ?

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