Tencent's strategy: live service, AI tools, evergreen titles

Tencent’s Strategy Leans Into Live Service and Evergreen Growth

Tencent’s strategy has never been about chasing quick wins, and Yong-yi Zhu, VP and head of operations, strategy and compliance at Tencent Games, makes that clear from the start. “I think our holy grail is live service, right?” he says. The company’s DNA is built on titles like Honor of Kings, League of Legends, and Valorant, games that grow with their communities rather than fading after launch. That approach, Zhu argues, provides stability to studios and turns gaming into a lifestyle, not just a fleeting hobby.

Why Some Studios Left the Fold

Tencent's portfolio shifted dramatically last year. UK studios Splash Damage and Bulkhead went independent, and that came after similar exits by The Chinese Room and Secret Mode earlier in 2025, so the pattern is clear. Zhu won't spill the details on those separations, but he's candid about the reasoning. Some partnerships just don't work. “For certain studios we feel like we can't help them amplify their game,” he explains, and the real test, he says, boils down to whether both sides actually gain something from the arrangement. So he asks: “Are we bringing something to the table as much as the developers are bringing something to the table?” But that's the whole question, isn't it?

Sometimes the answer is no. “There are certain situations where we acquire a studio and actually we have trouble integrating them because of market conditions or cultural differences,” Zhu admits. Not every bet pays off, and he's realistic about that: "Not everything will end up being a slam dunk.”

The Evergreen Philosophy

So what does Tencent’s strategy actually look like in practice? It’s deceptively simple. Zhu points to evergreen titles as a cornerstone, spanning both single and multiplayer experiences, and that foundation holds firm across the company’s broad portfolio. The single-player side is well-represented in the firm’s mobile games portfolio, but the ultimate goal remains consistent, one that sounds almost quiet yet carries enormous weight: “building sustainable communities long-term, having games that continue to engage with people.” And that’s the whole game, really.

It’s not strictly about live service, though. “It can be an IP that you build up,” Zhu says, pointing to Call of Duty as an example of an evergreen franchise that thrives through annual iterations rather than a single ongoing platform.

“I think more and more we’re trying to bring stability, and you typically don’t see Tencent doing the same thing.”

That stability is the antidote to the boom-and-bust cycle that plagues premium game development, where studios launch a title, then face layoffs when the revenue dries up. Tencent’s strategy aims to avoid that whiplash entirely.

How Tencent Supports Its Global Studios

Zhu runs operations and strategy for the global games business. That means overseeing around 20 studios, and the roster is a sprawling mix: Miniclip, Sumo Digital, Funcom, Fat Shark, Sharkmob, 10 Chambers, and Stunlock Studios across Europe, plus Digital Extremes in North America and Grinding Gear Games in New Zealand. His focus isn't on expansion. It's on making sure these studios succeed at what they're about to launch, he says, and that's a quieter, more deliberate ambition than chasing growth for its own sake. So he steers, rather than scales.

That means pulling in expertise from the wider Tencent ecosystem, covering regional publishing, technical support, testing, backend services, and analysis. We've done it as Tencent in the domestic market, and now we're trying to translate that into the global market, Zhu explains. So it's a familiar playbook, but the stakes are bigger. The challenge is real. But the infrastructure and know-how already exist, and the company is betting that what worked at home can be adapted for players everywhere, even if the rules, tastes, and competition don't line up neatly.

Consider the Dune Awakening fix. Experts flew in from China and Europe to help, and they’ll sit right alongside the devs at Funcom, working through the issues as a single combined team, which is a far more hands-on approach than most studios would ever take. But sometimes those experts don’t leave. They stick around permanently if the fit works out, and that's it.

Creative Control Stays Local

Creative and artistic design mostly stays with the individual studios. Tencent steps in only for cross-cutting challenges, like specific Unreal Engine issues or publishing hurdles in regions like MENA or Southeast Asia. That's the whole model. It's a hands-on approach that respects studio autonomy while using the scale of a massive parent company, but they don't meddle in the day-to-day craft, and that distinction matters more than most outsiders realize. So the balance is simple, yet powerful.

Does Size Matter for Tencent’s Strategy?

After Funcom’s redundancies last October and the closure of The Outsiders, the studio behind Metal: Hellsinger, questions arose about whether Tencent was pivoting toward bigger live-service projects. Zhu pushes back on that framing. “It really depends on the studio to be honest,” he says.

Funcom had been running Conan Exiles as a live service long before Tencent acquired them, and Zhu notes that this operational rhythm is part of their DNA, a trait forged through years of steady updates and community management. Other studios tried live service, found it didn't stick, and have returned to premium titles where they excel. But for us, we really want to help build studios that are best in class in their craft, whatever that might be. So they're not chasing a trend. They're building on what already works. It's a foundation, not a gamble.

But what about smaller games? Joe Brammer, CEO of Bulkhead, previously claimed Tencent “wouldn’t look at any game that was less than £50 million.” Zhu disagrees: “I don’t think there’s anything that’s stopping us from making smaller games. We do have small games in our portfolio.”

He points to Larian Studios and From Software as “north stars” in Tencent’s studio investments, companies that built their reputations slowly, not through a string of blockbusters but through focused, purposeful games that grew their audiences step by step over many years. So he’s clear about one thing. It’s not true that they ignore smaller titles. “I don’t think it’s necessarily true that we don’t look at smaller games,” he says, and that conviction shapes how they evaluate potential partners, even when the big hits dominate the headlines.

The Outsourcing Question

A year ago, Zhu floated the idea of spinning up Chinese support teams to bridge Western and Chinese operations. But progress since then has been slower than he'd like, and timezone challenges are a big part of the reason. So the focus has shifted. Now it's about sharing learnings across studios and exploring a hybrid model where smaller core teams get supplemented by external development. That's the new plan.

That model has worked well for Star Wars: Galactic Racer. Zhu sees clear parallels in the development cycle of Expedition 33, where the central question becomes a matter of balancing internal staffing against the flexibility of outside vendors. So it's really about how many people we should keep on staff. And how many we should bring in from an outside vendor? The answer isn't fixed. But for Zhu, the calculus hinges on the project's specific needs at any given moment, not on a one-size-fits-all formula. We've seen it work before. It can work again.

Location matters. Sumo Digital might support European studios because of proximity, though the UK isn’t the cheapest place to operate. “You have trade-offs on these types of things,” Zhu says.

North America presents particular challenges. “North America’s a tougher and tougher place to be, unless you have a very solid dev team that has worked together for a long time,” he notes, drawing on his Activision experience where a tightly knit Santa Monica team delivered content year after year. For support roles, though, “it doesn’t make sense to be in such an expensive part of the world.”

AI Tools and the East-West Shift

Gamescom’s Opening Night Live featured an unusually high number of polished titles from Chinese studios. Is the industry’s center of gravity moving east? Zhu laughs. “I would say I hope so,” he says, and then the punchline lands with a grin, because the reason is simple and personal. “I was born in China.” But that hope isn't blind, it's rooted in the sheer quality on display, so the question lingers long after the show ends.

He credits Black Myth: Wukong with inspiring Chinese developers to aim higher. They now know what really, really good looks like for console and PC, and that standard changes everything about how they judge their own work. Past experience in art outsourcing gave them a solid foundation. But now they've got the ambition and better tooling to close the gap. It's a different game entirely.

AI as an Amplifier, Not a Replacement

Zhu sees AI as that tooling's core advantage. It's not about replacing people. But for Zhu, AI is all about making people more effective and efficient, which means smaller teams can now produce more content and iterate faster without ballooning in size, even as their output grows.

“China in general really loves AI as a tool.”

Western developers, by contrast, often approach AI with caution, worried about ethics, copyright, and player backlash. But Zhu’s advice cuts through all that noise. It's simple. “I think people should just not be afraid of AI. It’s like the internet, it’s coming,” he says, and that comparison carries real weight because the internet didn't vanish when regulators panicked, nor did it destroy the industries it touched, so why should this technology be any different? Don't hide from it. So embrace the shift, and you'll find the tools aren't the enemy. They're just the next step.

He’s personally experimented with AI to boost his own productivity, and he pushes Tencent’s studios to treat it as a genuine tool for coding, art, rigging, motion matching, code review, and even production management. Slack bots nudge team members for updates. And that’s just the start, but it’s a real shift in how they work. It can’t replace judgment, though. So the real test is whether these AI assistants actually cut the grunt work without adding new bottlenecks, which remains an open question for teams juggling tight deadlines and complex pipelines.

Copyright remains a thorny issue. Zhu acknowledges the industry must resolve questions around generative AI content, but he sees a clear path forward: confining AI training data to Tencent’s own libraries. “We make sure that our data is confined to our studios,” he says, with agreements in place to prevent internal creations from leaking out and appearing in other games.

What Comes Next

Tencent’s strategy is calculated experimentation. It places bets both large and small across a sprawling portfolio. The recent retreat from Bulkhead and Splash Damage, plus the redirect of AAA studio Lightspeed, shows a willingness to cut losses. But the day after this conversation took place, the company announced a minority investment in W4, the commercial development partner of the Godot engine, and that's a telling move. So they pivot fast. They don't cling to failing projects.

Zhu’s throughline remains engagement, no matter if a game is live service or not. But his focus never wavers. “My purview is always about how do we keep people engaged, make sure that they’re having fun,” he says, because, to put it bluntly, that fun directly fuels the business side of things. It’s that simple. “The more people love your game, the more they’re going to play your game,” he adds, and that’s the entire equation,one that hinges on joy rather than gimmicks. So he sticks to that core.

Frequently Asked Questions

What is Tencent's 'holy grail' according to Yong-yi Zhu?

According to Yong-yi Zhu, Tencent's 'holy grail' is live service. He states, 'I think our holy grail is live service, right?'

Why did some studios leave Tencent's portfolio?

Some studios left because Tencent felt they couldn't help amplify their games. Zhu explains, 'For certain studios we feel like we can't help them amplify their game,' and the real test is whether both sides gain something from the arrangement, asking, 'Are we bringing something to the table as much as the developers are bringing something to the table?'

How does Tencent support its global studios?

Tencent supports its global studios by pulling in expertise from the wider ecosystem, covering regional publishing, technical support, testing, backend services, and analysis. Zhu explains, 'We've done it as Tencent in the domestic market, and now we're trying to translate that into the global market.' They also send experts to sit alongside developers, as seen with the Dune Awakening fix, where experts flew in from China and Europe to work with Funcom.

Who retains creative control in Tencent's studio partnerships?

Creative and artistic design mostly stays with the individual studios. Tencent steps in only for cross-cutting challenges, like specific Unreal Engine issues or publishing hurdles in regions like MENA or Southeast Asia, respecting studio autonomy.

What is Zhu's view on AI in game development?

Zhu sees AI as an amplifier, not a replacement, making people more effective and efficient. He advises, 'I think people should just not be afraid of AI. It's like the internet, it's coming,' and believes it allows smaller teams to produce more content and iterate faster.