Tencent considers exiting game studios after 41.9% Don't Nod stake

Tencent is weighing exits from game studio investments including Marvelous, extending a retreat by Chinese tech giants from overseas gaming bets.

Tencent is considering exiting investments in game studios including Japan's Marvelous, according to a report Monday, as China's largest gaming company joins a broader pullback from international studio funding that has already claimed more than a dozen developers since 2024.

"The retreat reflects a fundamental reassessment of overseas gaming investments made during the 2019-2023 expansion window," said Charles Yu, a partner at Shanghai-based Pillar Legal. "Chinese companies are now prioritizing domestic evergreen titles over the cost and complexity of managing international studios."

The move follows Tencent's refusal to inject additional capital into Don't Nod Entertainment, the French studio behind Life is Strange, where it held 41.9% of shares and 33.5% of voting rights at the close of fiscal 2025. Don't Nod's auditors warned the studio could run out of cash by November after Tencent declined both a short-term capital increase and co-production financing for active projects. The studio held roughly 8.8 million euros as of April 13.

The pattern mirrors NetEase's withdrawal from more than a dozen international studios since 2024, including Nagoshi Studio — founded by Yakuza creator Toshihiro Nagoshi — which closed after NetEase refused to fund a 7 billion yen ($44.4 million) gap to complete its debut title Gang of Dragon. For Tencent, exiting positions in Marvelous and other studios would mark a reversal of the acquisition strategy that made it the world's largest gaming company by revenue, with implications for the valuation of mid-tier Japanese and European developers that relied on Chinese capital.

Chinese Tech's Global Gaming Retreat

The pullback extends beyond Tencent and NetEase. Since 2024, Chinese gaming companies have wound down or exited at least 15 international studio investments, according to public filings and press reports. NetEase alone closed Ouka Studios in August 2024, Worlds Untold in November 2024, and Jar of Sparks in January 2025. BulletFarm, founded by former Call of Duty design director David Vonderhaar, survived only by securing independent backing through a new investor group.

The shift reflects a strategic pivot by Chinese tech giants toward domestic markets and live-service titles with predictable revenue streams. Tencent's gaming revenue from China grew 12% in 2025, outpacing its international gaming segment which grew 4%, according to company filings. The company's overseas gaming acquisitions peaked in 2021-2022 with purchases including Sumo Group for $1.3 billion and a minority stake in Ubisoft.

What's at Stake for Marvelous and Other Studios

Marvelous, the Japanese developer behind Story of Seasons and Daemon X Machina, could face a valuation reset if Tencent exits its position. The studio's shares trade on the Tokyo Stock Exchange, and Tencent's stake — acquired during the 2020-2021 investment wave — has been a key valuation support. Japanese gaming stocks have already underperformed the Nikkei 225 by 18 percentage points this year as concerns about Chinese capital withdrawal mount, according to Bloomberg-compiled data.

For the broader industry, the retreat marks an end to the era of easy Chinese capital that funded studio launches and independent development between 2019 and 2023. "The creative freedom with Chinese backing model carried structural risks that were not always visible at signing," said David Kaye, founder of venture capital firm F4 Fund. "When a Chinese publisher retreats, it retreats completely, without the press releases and transition timelines that characterize Western industry exits."

This article is for informational purposes only and does not constitute investment advice.