US President Donald Trump’s ban on WeChat and Tencent Holdings could impact the global esports community, as Tencent is a heavy investor in the industry.
Trump signed the Executive Order on August 6, banning any business dealings with WeChat parent company Tencent within the country by September 20. Trump issued a similar order against TikTok maker ByteDance, essentially banning the US version of the app if the viral short-video platform is still owned by its Chinese parent company.
However, while the TikTok ban is broadly against ByteDance, the White House reportedly told an LA Times reporter that the Tencent ban would only impact transactions via WeChat. Nonetheless, the broad language and inexact definition of “transactions” in the vague executive order has left a lot of heads scratching – including unanswered questions over the impact on the growing esports industry.
Tencent has numerous stakes within the gaming industry, including owning a 100% stake in League of Legends owner Riot Games, as well as 40% in Fortnite maker Epic Games, among others. Tencent is the “world’s largest video games company by revenue,” according to an FT report.
Recently, Tencent has also invested heavily in the esports industry, promising a $15 billion push into the industry for 2017-2021. The industry is expected to have more than 450 million viewers this year, with global revenues reaching $1.1 billion.
Tencent backs the world’s most popular esports tournaments, including League of Legends and the mobile game Honour of Kings. These tournaments can bring in 80 million worldwide viewers per match. Other global sponsors for these titles include McDonald’s, Volkswagen, Nike, and others.
With more than 100 million viewers tuning in during the 2019 League of Legends World Championship, making it the most-viewed esports tournament of 2019, and similar numbers expected for this year’s biggest esports event, a ban on Tencent transactions that would include League of Legends would be catastrophic for the entire esports world.
The order could mean that any multinational co-sponsors of Tencent-backed esports tournaments will face legal issues in the US, depending on how the executive order is interpreted. It could also impact the operation of such a venture – again, depending on how these “transactions” find the world’s most popular esports tournaments.
The order also states that it will prohibit “any transaction that is related to WeChat by any person, or with respect to any property, subject to the jurisdiction of the United States, with Tencent Holdings Ltd, or any subsidiary of that entity, as identified by the Secretary of Commerce.” The issue lies in the portion “Tencent Holdings Ltd, or any subsidiary of that entity,” and it is unsure how broadly or strictly this will be enforced.
There are many subsidiaries of Tencent Holdings, including Tencent Pictures that is involved in the upcoming Top Gun, Wonder Woman, and Terminator titles. Tencent also has investments in Snapchat, Universal Music Group, Spotify, and has recently struck a $1.5 billion deal for five years with the NBA for streaming rights.
After news of the executive order, Tencent shares lost as much as $66 billion in value.
At this point, it is unclear whether WeChat could continue its operations after September if it is not sold. Moreover, unlike TikTok, it does not have any potential buyers.
TikTok’s owner ByteDance has until September 15 to reach a deal with Microsoft. Furthermore, the Wall Street Journal reported, Twitter is in pursuit to buy the Chinese social media platform, too.