“Last week, I was racing against the clock to book meeting rooms by tightening the spring, and today I went to confirm the last day. It’s very ‘byte’ style,” commented an employee of ByteDance’s gaming subsidiary, Chaoxi Guangnian, upon receiving the notice.
On November 27th, ByteDance personally slammed the brakes on its once highly anticipated gaming business—ByteDance’s gaming subsidiary, Chaoxi Guangnian, announced a large-scale business contraction. Some ongoing user-generated content (UGC) and AI-generated content (AIGC) projects will be retained, and well-performing games that are already live will seek detachment while ensuring ongoing operation. Projects that have not yet been launched, except for a few innovative and related technical projects, will be shut down.
Chaoxi Guangnian provided the reason for this move: “Business direction and organizational adjustments will focus more on exploring innovative games and related technologies.” Consequently, the affected employees are mainly concentrated in the self-developed projects that have not been launched, and there will also be a contraction in the publishing line. It is estimated that this optimization interval accounts for approximately 30% to 40% of the overall size of Chaoxi Guangnian, which is around 2,000 people.
Insiders close to ByteDance revealed that this decision was repeatedly discussed and confirmed by the business head, Yan Shou, and ByteDance CEO Zhang Yiming. Zhang Yiming believed that although the gaming business had achieved some success, ByteDance’s gaming pursuits in the past few years were characterized by being “big and comprehensive,” with projects lacking focus and resources scattered. He felt that the company should redirect its efforts and resources towards more foundational, innovative, and imaginative projects.
In fact, as early as November 15th, there were rumors that ByteDance was considering selling Muting (沐瞳), with rumored sale prices of “no less than $5 billion” and ” $2 billion.” Potential buyers included the Saudi sovereign wealth fund PIF’s Savvy Games Group and Tencent. At that time, there were scattered rumors in the industry that “ByteDance may significantly cut back its gaming business, and a downsizing of the entire Chaoxi Guangnian is not ruled out.”
However, it wasn’t until November 26th that a screenshot circulating on social media completely revealed the prelude to ByteDance’s gaming “earthquake.” The market, for a moment, interpreted this as Zhang Yiming and even ByteDance losing patience with the gaming business—some even elevated ByteDance’s gaming contraction to a pessimistic view of the entire gaming industry.
To be frank, creative businesses like gaming can achieve some results through resources and time. However, even after Tencent’s CEO Pony Ma stated internally that he “no longer believes in buying traffic,” ByteDance’s gaming efforts still heavily relied on traffic-driven promotions, unable to break out with a market-leading blockbuster.
In 2020, Zhang Yiming stated at ByteDance’s all-hands meeting that while the gaming business had not made significant breakthroughs, there were some advancements, and patience was required. However, the challenge for the business lies not only in patience but also in team collaboration, product genes, and timing—there’s always a misconception that the gaming industry is very lucrative and has a low failure rate. In reality, the survivorship bias plays out, and not every game can become a phenomenon like Genshin Impact.
In essence, the competitive edge lies in the accumulation of gaming product capabilities within the team.
As an analysis from “iResearch” pointed out: “The accumulated operational and technical experience from the four classics (QQ Speed, QQ Dance, Dungeon & Fighter, CrossFire), the four studios cultivated during the PC gaming era (Tencent Games, Photon, Aurora, Magic Cube), support from longstanding rivals like Shanda, Perfect World, and others within the premium 3.0 framework, coupled with the support of a forward-thinking investment team, has established Tencent’s position in the gaming industry.”
How did ByteDance’s gaming become a “discarded child”?
Before ByteDance ventured into the gaming business, public reports portrayed Zhang Yiming as atypical—a tech-savvy individual who never played games, possessed a strong sense of delayed gratification, and was extremely disciplined. Liang Rubo mentioned in an early interview, “He doesn’t play cards, doesn’t play games, doesn’t watch movies, and even gave himself the title of ‘moral champion'”; Zhang Yiming also stated in 2016 to Caijing that he didn’t play games. “If you pursue a sense of control through playing games, you might as well control yourself, like reading books, challenging difficult books, thinking about challenging questions. If you spend time playing real-world 3D games, why not use this ‘pursuit of control’ to start a business?”
It wasn’t until 2021 that Zhang Yiming’s perspective on games changed, mainly influenced by the biggest contributor to Douyin’s revenue—games. According to a report by LatePost, around 50% of Douyin’s revenue in 2019 came from game advertisements. Even so, the profits from game advertisements were still not enough compared to the gaming business. ByteDance was not subtly eyeing the gaming market; it was outright salivating.
Therefore, when ByteDance entered the gaming arena, Zhang Yiming transformed into someone who “forces himself to play games for two hours every Friday and precisely allocates the time from 8 to 10 in the evening after dinner.” Indeed, since the second half of 2017, ByteDance gradually expanded its presence in the gaming field, progressing from building its own publishing team to handling small games, acting as an agent, and then developing its own games. Until March 2019, companies like Shanghe Network, Shanghai Mokun, and Caesar Culture were successively acquired by ByteDance. In August of the same year, ByteDance took over Hero Entertainment’s “War Art: Infinite Evolution.”
In August 2020, ByteDance’s wholly-owned subsidiary, Beijing Youyi Technology, invested in Maibo Games, successfully acquiring popular games like “Tetris,” “Starry Nuts,” and “Bouncy Seed.” In September of the same year, ByteDance invested in Aiyou Interactive and, through its wholly-owned subsidiary “Zhiyu Zhizhen,” acquired a company under Aiyou Interactive, securing the mobile game “Red Alert OL” and the chart-topping “Idle Beauty” in the Japanese market.
With ample financial backing, ByteDance’s gaming influence rapidly expanded to include over 10 studios, four major publishing platforms, and 29 companies. Among them, well-known ones include Unparalleled Studio (focused on high DAU games), 101 Studio (developing classic IP games and MMORPGs), and Oasis Studio (specialized in researching MMORPGs and ARPGs).
“ByteDance dared to deploy personnel and capital on a large scale, thanks to the combination of traffic and capital. Therefore, multiple studios simultaneously launch projects,” commented a gaming industry insider.
In terms of traffic, ByteDance’s Douyin and Toutiao platform provided immense support to its gaming business. For instance, when the short video platform was promoting “Idle Beauty” and “Red Alert OL,” it obtained a steady supply of traffic from Douyin. In contrast, competitors had to rely on third-party promotion or purchase traffic through a single channel.
However, ByteDance’s gaming journey was not always smooth. In 2020, ByteDance launched a popular yet controversial game—”Play Together,” which quickly topped the App Store free list and achieved massive downloads. Unfortunately, it was criticized for copying concepts from other games, and the backlash led to the game’s removal from app stores.
Subsequently, ByteDance learned from this experience and began investing more resources in independent research and development. It also brought in experienced industry executives, such as Yan Shou, who was the former general manager of Mihoyo’s “Genshin Impact” business. This move was intended to enhance the company’s gaming capabilities.
Despite these efforts, ByteDance struggled to produce a gaming hit that could match the success of its short video platform, Douyin, or its news aggregator, Toutiao. The gaming industry is known for its high level of competition and risk, where only a small percentage of games achieve significant success.
ByteDance’s decision to scale back its gaming business suggests a strategic shift and a recognition that its previous approach may not have been effective. By refocusing on innovative games and related technologies, ByteDance aims to consolidate its efforts and resources to achieve more sustainable success in the gaming industry.
It’s worth noting that ByteDance’s move comes at a time when the gaming industry is undergoing rapid changes, with the rise of new technologies such as virtual reality (VR), augmented reality (AR), and the metaverse. Companies are exploring innovative ways to engage users and create immersive gaming experiences. ByteDance’s emphasis on exploring innovative games and related technologies aligns with the broader industry trends and signals a willingness to adapt to the evolving landscape.
In conclusion, ByteDance’s decision to shrink its gaming business can be seen as a strategic retreat to regroup and refocus on areas where it can leverage its strengths. The company’s commitment to exploring innovative games and technologies indicates a forward-looking approach, recognizing the dynamic nature of the gaming industry. Whether ByteDance can successfully navigate the challenges and emerge with groundbreaking gaming products remains to be seen, but the move reflects a strategic mindset in response to the evolving market conditions.