ByteDance's Shift Away from Gaming Results in Mass Layoffs
ByteDance, the Chinese tech giant behind TikTok, is scaling back its gaming division, leading to significant job cuts This strategic move reflects the intense competition in the industry
ByteDance, the Chinese tech company behind TikTok, is making changes by scaling back its video gaming operations, leading to the loss of hundreds of jobs.
According to a source familiar with the situation, the Beijing-headquartered company plans to shut down Nuverse, the division responsible for its video game studios, next month in order to redirect its attention to its primary business areas.
The announcement was made internally on Monday, according to the source, who requested anonymity due to the details not being public. Nuverse will maintain certain operations, including a team focused on exploratory initiatives, but did not specify the number of staff involved.
However, the company will cease development on unreleased games and attempt to sell off current titles, such as "Crystal of Atlan," an anime-style multiplayer game, and "Earth: Revival," a sci-fi survival quest, both of which were launched earlier this year.
ByteDance is actively searching for a purchaser for Moonton, a video game studio it acquired in 2021. Moonton is most famous for its popular mobile game "Mobile Legends: Bang Bang," where players can engage in online battles.
The booth at an exhibition on September 5, 2020 displays the logo of Tencent, a Chinese multinational technology conglomerate holding company, in this undisclosed photo.
China is importing 27 foreign video games as it opens its market to global titles. This sale is significant because the title, which has over 1 billion installations and more than 100 million monthly active users, is Nuverse's largest game, according to Niko Partners, a market research firm specializing in video games and esports.
On Tuesday, a spokesperson from ByteDance confirmed that they have decided to restructure their gaming business after a recent review.
"We consistently review our businesses and make adjustments to focus on long-term strategic growth areas," the representative stated, providing no further details.
ByteDance is currently reorganizing its operations, which includes downsizing its virtual reality unit, Pico, according to a source from CNN. This move comes at a time when several other major tech companies have also had to reduce their workforce due to the economic impact of the pandemic.
ByteDance has heavily invested in the game business but has not achieved significant success, according to Lisa Hanson, CEO of Niko Partners. Producing blockbuster titles requires a significant amount of investment, which may not align with ByteDance's current investment focus.
Neil Barbour, an associate research analyst at S&P Global Market Intelligence, stated that the wider industry is currently encountering difficulties. According to him, mobile gaming revenue is decreasing, while the costs of acquiring users are increasing. He shared this information with CNN.
Fierce competition
Some publishers are now re-evaluating their significant investments in the industry and are realizing that the expected payoff may take longer than anticipated or may not materialize at all.
ByteDance jumped into the gaming space in 2019. Since then, it has failed to make significant inroads against industry leaders Tencent and NetEase.
In this handout image, Chen Shaojie founder and CEO of DouYu International Holdings Limited, poses for a picture in New York, USA, on July 17, 2019.
Stringer/Imagine China/Reuters/File
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"Tencent and NetEase make up more than half of Chinas games market, and Nuverse is nowhere near that," Hanson told CNN.
She stated that ByteDance might be trying to minimize its losses, especially because gaming only made up a small portion of its business. According to Hanson, the Nuverse arm is estimated to contribute "about 1% or less" of the total revenue. She also mentioned that even if ByteDance decides to stop game development and publishing, it would not significantly affect their overall business.
Niko Partners reports that China holds the title for the largest mobile and PC gaming market in the world. The firm estimates that the total number of gamers in the country will reach 710.3 million this year, with the industry expected to generate approximately $47.7 billion in revenue from video game software and services.
