What Trump's Tencent ban means for the gaming industry

Yahoo Finance Video
Updated

When President Donald Trump signed executive orders targeting TikTok and WeChat (and by default their respective parent companies, ByteDance and Tencent), the gaming industry was rattled by the move. That’s because Tencent has a stake in the developers of some popular games, including “League of Legends” (Riot Games) and “Fortnite” (Epic Games). Yahoo Finance’s tech editor Dan Howley explains what the potential ban could mean for gaming companies.

Video Transcript

- Let's turn our attention now to everything that we've heard from the Trump administration over the last, I guess is only 18 hours now. WeChat with their parent company Tencent now in the crosshairs of President Trump, in addition to all the goings on between Microsoft and TikTok. Dan Howley joins us now. Howley, I guess to keep things straight of where we're at right now as we head into the weekend where one imagines a tweet could change everything. But certainly there has been a change just in the last day or two.

DAN HOWLEY: Yeah, so what's happening now is we still have this 45 days for TikTok to potentially be purchased by some American company. And then at that point, Trump would cut off companies from being able to do business with TikTok. And then now we have Tencent wrapped in there with WeChat, basically being threatened to also be cut off from working with American companies.

Now TikTok, obviously, an up and coming social network, very popular among the Gen Zers, but WeChat, far, far more important of an app. It really is a way for Chinese individuals within the country to communicate, as well as to talk to the diaspora, or diaspora, however you want to say it from China in other countries. So it really is a key communication tool, and don't forget US businesses need to use it as well to talk to individuals in China.

So I think this is an issue that we're going to hear a lot more about, and it should be getting more attention than TikTok, which sure it's cool, because there's fun dances, but WeChat is an incredibly important app and an ecosystem unto itself. So if the US cuts itself off from this, it would have drastic implications for how much business it can do with China.

- And, Dan, of course this is a developing story, so we don't quite know all the details of what this EO could entail. But of course, WeChat is owned by Tencent, which also has stakes in Snap, Blizzard, Spotify, Reddit. The list goes on and on of basically some of the most innovative companies in the United States that have partial ownership from that Chinese giant. Do you feel like the Trump Administration is aware of all these tie-ups? What happens to all of those companies here?

DAN HOWLEY: Yeah, look, right now they seem to be focusing specifically on WeChat, but you have to imagine that if Tencent is wrapped into it at large, then that really will have a massive impact on these companies that have been funded by Tencent directly.

Look, we just talked about Epic Games the other day and how its network or its valuation is in the billions now. That has a lot to do with the fact that Tencent put a ton of money into it a while ago. I believe they have 40% of the company shares now, and they've done that with a slew of tech companies throughout the US. So if they're really going to try to get at China in the tech industry, this isn't the way to do it. It seems more along lines of cutting off your nose to spite your face.