Tencent's Game Platform Is Rising to Threaten Steam. So What Is Its Biggest Weak Spot?

To take a slice of the same pie as Steam, Tencent's WeGame is running risks as big as the opportunity.

A rumor that Steam was about to leave China set off a wave of panic.

According to a post the gaming outlet Chuapp put on Weibo on August 7, the veteran British games magazine EDGE ran a piece in its latest issue titled "Eastern Promise." It opens like this: after the China launch event for Final Fantasy XV in November 2016, a senior manager inside Tencent told a Chinese game developer about some of the company's plans. One key piece of information: "When the time comes, Steam will cease to exist in China."

The chain of sourcing is unusually long. EDGE has a high reputation in the industry, and the writer, Simon Parkin, files for The New Yorker and The Guardian, yet the scoop still looks hazy. Beyond that one sentence, there is nothing.

As the story spread among players — many of them alarmed — Tencent WeGame's official Weibo account denied it on the afternoon of August 8, saying no one from the company had attended last year's Shanghai launch event for Final Fantasy XV, and adding: "WeGame has always stood for fair competition." The post was later pinned to the top of the account.

This was not the first time Tencent had answered speculation that it would block Steam's China region. Back in April, at the Tencent Interactive Entertainment press conference, Tencent stressed: "Whatever server or payment problems Steam runs into in China, they have absolutely nothing to do with Tencent."

These edgy statements point to the thing "Eastern Promise" set out to examine: one way or another, Tencent is becoming a serious threat to cross-border game platforms like Steam.

Answering the Zhihu question "What do you make of Tencent's game platform wanting to be 'China's Steam'?", a user called MR.QUIN put what may be a common view among Steam users: "One more game platform to choose from is a good thing — as long as it doesn't become the only choice."

For many Chinese players, Steam and its founder Gabe Newell are the ones who "opened the door to a new world." Founded in 2003, Steam is now the largest PC game distribution platform in the world. Game companies and independent developers everywhere sell the games they make or license on it, and it has also become a gathering place for players online.

Steam did not open a China region until the end of 2015, yet by user numbers China is already its third-largest market. According to SteamSpy data, the number of Chinese players on Steam passed 20 million this July, behind only the United States and Russia.

For a long time, though, Chinese players neither knew nor cared much about Steam. Most of them would rather pour money into free-to-play online games than pay a fixed price for a game up front.

Steam's start in China owed a lot to Dota 2, a game Chinese players nicknamed "Faith 2." When Dota 2 arrived on Steam in 2012, players flooded in to register accounts and grab activation codes. In 2013 Valve and Perfect World built Dota 2 servers for the China region, and every Dota 2 account had to be tied to a Steam account, which made Steam's Chinese user base explode. The forced link annoyed many players at first, until they discovered that Steam was a huge game library full of surprises.

To catch this wide market, Steam made a series of adjustments.

When it opened the China region, Steam cut prices to varying degrees, taking Chinese players' spending power into account. Bethesda's AAA title Fallout 4, for example, cost $59.99 in the US region but only 199 yuan in the China region, nearly half off. There was another motive, of course: making China a low-price region helped attract and build up a paying audience there.

Steam went on to support Alipay, WeChat Wallet, Tenpay and other third-party payment services, and, given the peculiarities of China's internet, rented dedicated servers to spread download traffic. In early 2016 it ran its first Lunar New Year sale — a holiday that would not normally count for much on a platform built for a global audience.

Under that push, Chinese players' spending power did not disappoint Steam or the overseas game companies. Grand Theft Auto V, released in 2015, sold 843,000 copies in China; CS: GO sold more than a million there.

All of this could be shaken by the arrival of Tencent's WeGame.

When WeGame was first announced as the successor to TGP, plenty of well-known foreign gaming outlets decided this "Chinese Steam" would be a huge threat. Polygon called WeGame "Steam's first real competitor."

There is no question that Tencent holds big advantages in building a game distribution platform in China.

One is localization. Tencent told QDaily: "In the Chinese market, apart from the most basic products and services, almost any Chinese company would probably do a better job than Steam on the local experience." That means Chinese-language versions, steadier servers, compliance with publishing rules, and so on.

Games with Chinese support make up a small share of Steam's catalogue; English-language titles still dominate, which is part of why Steam has long been treated as the preserve of a narrow elite among Chinese players. Server outages hurt the experience too. Not long ago, Chinese users opening the Steam store kept hitting error codes 101 and 103. Steam's support staff eventually replied that the problem lay with local ISPs, and that there was no fix for now.

By market size, Tencent Games is already the biggest game company in China, while Steam is a niche product still operating in a gray area of Chinese law.

In the contest between Steam and Tencent, a fair number of publishers are cautiously optimistic.

Mr. Pumpkin Adventure, made by the independent developer Guo Liang, was one of the launch titles for the China-region PS4. In May this year, Little Triangle (《小三角大英雄》), the newest game from Fat Pudding Studio, which he founded, came to TGP. A month after release, the studio announced that the game had already sold more copies on TGP than on Steam.

"Having several platforms is at least a good thing for players and developers alike — everyone gets more choices. For Chinese developers like us, WeGame at least makes communication a lot easier." But Guo Liang added: "As for the future, that's hard to say."

The indie game company Coconut Island Games also publishes games. Its founder, Bao Weiwei, thinks much as Guo Liang does: "For us it's an upstream-downstream relationship in the industry chain — we can give them more products. So our stance toward platforms is open and cooperative."

The biggest difference between Tencent and Valve, though, is that Tencent is an internet company at heart, not merely a game company. That explains why Tencent is always keen to advertise "the extra fun beyond the game" — things like "socializing with friends" and "lively communication through rich media" — all of which drive activity across Tencent's platforms.

Tencent's 2016 annual report put QQ's user count at about 868 million. Its first-quarter results, released this May, showed that Weixin and WeChat together had reached 938 million monthly active users.

Anyone with a QQ or WeChat account can log into any Tencent product without effort. For those users, WeChat Pay and QQ Wallet make paying easy, and getting money out of their pockets for a game could hardly be simpler. In "Eastern Promise," a game designer living in China named Xin Ke argues that Tencent's rise comes from the users it keeps absorbing, not from making games.

As Tencent said in an interview, its "pool of potential users is far larger." These people may have had few ways into games until now; they may never have played a big foreign title and may not know what Steam is. But between the marketing push across Tencent's products, friends sharing on WeChat Moments and promotion on QQ Zone, they could turn into new WeGame users and take an interest in PC games — exactly the way Tencent built up online games and mobile games before.

Tencent's haul is already considerable: Riot Games, maker of League of Legends; Activision Blizzard, maker of Warcraft; the Finnish mobile-game giant Supercell; and Frontier, maker of RollerCoaster Tycoon — all are partners or investments. Even indie games are central to WeGame's plans.

Tencent's game developer platform ran a global indie developer competition last year, and early this year Tencent launched the Aurora Program to back indie games. One detail is telling: after Tencent announced WeGame in April, the first game to go live on the new platform was a side-scrolling indie title called I Am the Hero.

This position of total dominance is precisely Tencent's weak spot.

Bringing games onto so broad a social base means that Tencent WeGame, players and developers alike will draw plenty of criticism and regulation.

Honor of Kings was attacked by People's Daily and other mainstream outlets, and was even named the chief culprit in harming the health of minors. In July, Tencent made a "concession" of its own accord: Honor of Kings introduced a strict anti-addiction system limiting how long minors can play each day. Tencent also upgraded the "Growth Guardian Platform" it launched in February and said it would tighten real-name verification further. For a platform as new as WeGame, crises like this may not be rare.

Steam, by contrast, opened up the digital distribution market not only because it caught the decline of physical games at the right moment, but because it struck the right balance with game companies and developers, and so gradually won their trust.

In 2005 Valve signed its first distribution deal with a third-party publisher; Canada's Strategy First became the first company to sell games on the platform. More and more companies joined after that. Steam never held back a rival's strong title to make room for Valve's own games, and never neglected small and mid-sized companies or independent developers in order to please the big publishers. In some ways it has treated the independents better.

In 2012 Steam started Greenlight, a program to help small teams and solo developers publish games without funding behind them. Steam handed the decision to players, who voted for the games they liked; Steam then worked with the developers to put the winners on the platform.

That is a large part of why Steam's catalogue is so big and covers so much ground. Players get early access not only to big titles like The Witcher, Watch Dogs and The Division, but to countless interesting indie games. And the constant sales and discounts are hard to walk away from.

Developers and players are also reassured by Valve's technical muscle and its refusal to tolerate cheats — another reason Steam has grown steadily and stayed dominant for more than a decade.

In 2002 Valve built the first version of its VAC anti-cheat system. Applied at first to Counter-Strike, it led some major titles to drop the anti-piracy programs they had been using.

Players caught by VAC face penalties of different weights, from a ban on a single game to a ban on the whole account. VAC bans are permanent and cannot be moved or lifted by Steam support, though a ban confirmed to be an error is removed automatically. No one has yet reported cracking VAC, which is why many players will not risk using cheats online. And according to Dot Esports, Steam recently banned a large batch of accounts through VAC — the total may have passed 40,000.

For developers and players alike, Steam is open enough, and fun enough, that it is not merely a place to sell and buy games.

To put WeGame anywhere near Steam's position, Tencent would have to do roughly the same. That is still only a possibility, because WeGame and the developers working with it face one of China's distinctive features: censorship.

This line no one can cross keeps players away from many fine games made abroad, and it also cuts the Chinese game market off from the market outside. Any game that hopes to succeed in China outside Steam needs its developer to study, in detail, how to get past the approval process. Some games have entered the Chinese market only after scenes were cut or character models swapped out, but these methods of "harmonization" damage the work itself, which hardcore players find hard to accept.

Blood in the Chinese servers of CS: GO, for instance, was "harmonized" to black; Microsoft's Gears of War 4, released earlier on China's Windows 10 Store, was pulled over its violent content — to say nothing of AAA titles like Grand Theft Auto V and The Witcher.

That is WeGame's biggest problem. To play the best games the day they come out, players still have to find their way to Steam. And that remains Steam's heaviest weight on the scale.

Cover image from: gamingcentral