Chinese tech giants are snapping up gaming studios around the world
People play computer games at an internet cafe in Fuyang, China's Anhui province.
Lu Qijian | Visual China Group | Getty Images
LONDON – After decades of the U.S. and Japan dominating the gaming space, China's influence is growing as its tech giants snap up gaming studios around the world.
Now, some experts think video games could look a little different in the coming years as a result.
Questions are being asked about whether the Chinese owners of U.S. and European studios will try to influence the games they make, or indeed use them to promote Chinese values. It remains to be seen but subtle changes could happen in the coming years, according to some experts.
"Some of these values might be different from what many expect," British-Chinese writer Lu-Hai Liang told CNBC. "For example, Chinese female gamers are a massive market (500 million) and there have been many female-focused games and game studios that revel in this sector."
Thomas David, a semiconductor engineer in the U.S., told CNBC that he thinks gamers could start to see more titles where the "good guy" is Chinese and the "bad guy" is from the West, for example.
China's own gaming market is heavily regulated. It does not allow games that contain certain political views, gambling, gore, nudity and many other things to be released and sold in its home market. The movie industry is equally strict, with U.S. films having to be adapted before they can be released in China.
Exporting Chinese culture"This area — how China could use games to export its culture — is incredibly important and largely missed," Abishur Prakash, co-founder of the Center for Innovating the Future, told CNBC.
"China has several ways it can take its ideals to the world through games, and build a new kind of global power," said Prakash. "One way is by banning certain topics, like Taiwan or human rights, from being discussed," he said.
China could also establish "new centers within games that help showcase China's power," or use games to build its financial and commercial power, he said. "The next Chinese games might only allow users to purchase items in digital Yuan," said Prakash. "Or, the Chinese games might have Chinese platforms, like TikTok, embedded into them."
Others doubt that Chinese owners of Western gaming studios will try to change the games that get sold in the West.
"I would be very skeptical of something like that happening," Louise Shorthouse, a senior games analyst at Ampere Analysis, told CNBC.
Steven Bailey, principal analyst at Omida, told CNBC that "Chinese companies have had involvement in various Western game companies and content for quite some time, and understand that successfully making games for the West will not be supported by such changes."
He added: "Conversely, anyone releasing a game in China will need to adapt it for that market."
Tencent's sprawling investmentsTencent and NetEase have been snapping up stakes in gaming firms beyond China's borders for years with little opposition.
"Tencent keeps buying the #1 game in every niche in North America and Europe," wrote tech investor Rodolfo Rosini on Twitter in February. "This is important because games have cultural influence. And controlling the present and how reality is portrayed is very powerful."
"If Tencent were to buy a stake in every leading newspaper and TV company people would be up in arms, there would be political hearings etc," he added. "Instead they play the long game and they are buying the next generation's media properties without any competition."
For years, Hollywood has spread American values around the world and championed the country's military might. Now it could be China's turn to try to do the same, but through video games. However, while Hollywood often criticizes the U.S. and the actions of Washington D.C., China's tech giants would not be able to say a bad word against Beijing, which exercises great control over all of its domestic enterprises.
China has more gamers than any other country, making it a highly lucrative market for those that can get in. One of the reasons that U.S. and European gaming firms take investment from Chinese companies is that they're legally obliged to partner with a Chinese company before their game can be released in the country.
U.K.-headquartered Sumo became the latest gaming firm to sell to a Chinese tech behemoth on Monday, announcing a $1.26 billion deal with Tencent, which is the world's largest video game publisher.
Neither company immediately responded when CNBC asked how, or indeed if, Tencent will influence the games that Sumo works on.
But Tencent has traditionally taken a hands off approach to its investments and acquisitions, according to Daniel Ahmad, senior analyst at Niko Partners.
"The company could also be an invaluable partner for Tencent as it looks to push into the AAA game space itself with its own projects," said Ahmad.
"The deal would also help Sumo utilize Tencent's expertise in regard to games development and publishing within China," he added.
"Chinese game studios are looking to grow overseas and while organic growth is one option, acquisition allows these companies to build a presence much faster and with local talent," said Ahmad.
Tencent also invested $150 million in Reddit in 2019, angering some Reddit users in the process who were concerned that the platform may experience more censorship. However, this does not appear to have happened in any significant way.
Rising Seas Are Coming For Big Tech Campuses. Who Will Pay To Protect Them?
When residents of Sunnyvale tuned into City Council meetings this spring, they heard discussions about a welcome topic in the Bay Area: additional housing.
Like in the rest of Silicon Valley, home values in the largely suburban city have skyrocketed due to a severe housing shortage. In May, the median home sale price in Sunnyvale was $1.8 million.
To help alleviate the shortage, Sunnyvale is setting its sights on a 1,300-acre triangle of land known as Moffett Park, sitting on the shoreline of San Francisco Bay. Today, it’s mostly offices, the low-rise buildings separated by wide parking lots.
Sunnyvale hopes to transform the Moffett Park neighborhood.
Marissa Leshnov for NPR
Sunnyvale is reimagining it as an “eco-innovation district,” potentially allowing up to 20,000 units of housing for the first time, including affordable housing, as well as 10.5 million square feet of office and commercial space. New developments would feature green space with biking trails and landscaping for native wildlife. The city is doing an environmental analysis of the plan over the next year.
“One of the most sustainable things you can do is put people where they work and put people where transit is, so this is a huge opportunity,” says Michelle King, principal planner with the city of Sunnyvale.
The vision isn’t just Sunnyvale’s. It’s shared by one of the largest landowners in Moffett Park: Google.
Over the past five years, Google has quietly acquired 75 parcels there, worth almost $3 billion, according to tax records. In 2017, the company wrote a letter to Sunnyvale officials, urging them to rezone Moffett Park to allow housing and higher-density development.
Now, Google has several large construction projects underway, including its Caribbean project, two buildings with sloping green roofs, separated by a landscaped flood control channel. The company says as it expands, it plans to build mixed-use development, as it’s doing around the Bay Area, which combines offices, green space and housing available for the public, including affordable housing.
“We’re incorporating sustainability into everything we do in our developments,” says Jeff Holzman, Google’s director of real estate district development for Sunnyvale. “And we’re doing it to support our employees but also the community and hopefully the environment.”
Some are asking: Why build here at all?
The future of Moffett Park also includes sea level rise, which is expected to inundate a large part of it. Just like nearby cities, Sunnyvale is protected by aging levees that don’t currently meet federal safety standards.
Without those levees, parts of Moffett Park would already be underwater because the land has sunk. Before the arrival of tech companies, Sunnyvale was farmland, home to vast rows of fruit trees. Farmers pumped groundwater for irrigation, causing the land level to drop.
Silicon Valley was once called “the Valley of Heart’s Delight,” home to orchards and farms.
San Jose Public Library, California Room, Historic Postcard Collection
That groundwater, sitting a few feet below the surface in some spots, is another potential source of flooding. As sea levels rise, saltwater doesn’t just flood onshore. It also encroaches underground, pushing up groundwater that’s already there, closer to the surface.
When it rains, shallower groundwater gives runoff nowhere to go.
“It’s like a sponge that’s already soaked and full of water,” says Kristina Hill, associate professor of environmental planning and urban design at the University of California, Berkeley. “So you can’t get any more water into it.”
As a result, rainstorms can cause flash flooding, even forcing water out of sewer drains onto surrounding land. Shallower groundwater can also spread chemicals or contaminants in the soil. Traditional shoreline protection, such as levees, can’t stop it since the water is moving underneath.
“If you spent billions of dollars to build levees and then behind the levee, the groundwater comes up anyway and people are flooded out any time that it rains, that’s going to be seen as a failure,” Hill says.
Faced with this information, some city residents are asking why construction would be permitted in low-lying areas.
“Moffett Park is already heavily developed and is an employment center for the city,” King, the city planner, responded in a November meeting. “The city has a great interest in making sure that Moffett Park is protected in the future and that the investment that’s been put into Moffett Park at this point remains where it is.”
Funding runs short to build a new levee
To protect Moffett Park, Sunnyvale is pinning its hopes on a new levee, like other Bay Area communities. But efforts have already hit hurdles.
The county’s water utility, Valley Water, is leading the South San Francisco Bay Shoreline Protection Project. It would protect 18 miles of shoreline, potentially costing almost $2 billion.
The first section of levee, now nearing construction in a neighboring city after 15 years of planning, has already raised flags about funding.
Congress granted $124 million in 2018 to build the project, but construction bids came back almost double what was expected. Valley Water is covering the shortfall, raising its share of the project’s cost to $269 million, vastly more than it had planned for.
Now, as the agency looks at building two more sections of levee, including Sunnyvale’s, it’s warning that it can’t do it alone. Localities will need to contribute.
“They need to share the responsibility with us,” says Richard Santos, a member of Valley Water’s board of directors. “Because we’re all in collaboration together, and they all receive the benefits. But they all don’t pay. You know, you wanna play, you gotta pay.”
Which comes first: a levee or new buildings?
Sunnyvale is facing a timing problem, too: The levee could take several decades to build, leaving new homes and buildings unprotected against rising seas.
That’s giving some City Council members pause.
“Can I get comfortable with housing in the context of sea level rise?” says council member Russ Melton. “That’s where people live.”
Melton sees the need for more housing. But since there isn’t housing in Moffett Park now, the decision to allow it comes with considerable risk. Before voting, he needs assurances that the levee will be built.
“I’m going to need to see something that is plausible, that is funded, that has the political ability to get across the finish line before we make an irrevocable decision to allow housing in Moffett Park,” he says.
A feasible levee plan is years away. In the meantime, the city is weighing if it should have Google wait on its new construction, where thousands of people will live and work.
Google says allowing its projects to move forward would help ensure everyone is protected.
“I think that all of Sunnyvale needs to contribute to the solution, and I think we’re absolutely going to do our fair share and our part,” says Google’s Holzman.
Google is planning a major expansion beyond its Google Cloud campus in Sunnyvale.Marissa Leshnov for NPR
The company says it’s willing to contribute financially to build a levee if other Moffett Park businesses are asked to do the same.
“We kind of need projects like Moffett Park and others to move forward, so that it creates the economic ability to contribute into these solutions,” Holzman says. “The problem is going to exist whether we do more things in Moffett Park or not. And so it gives us a chance to help contribute to what needs to be a community solution.”
Experts say that economic argument can be problematic, because it incentivizes moving more people into harm’s way. Developing in risky areas can help pay for protections there, but what if those protections fail?
“Obviously, the challenge there is you have just put a lot of people at the forefront,” says Linda Shi, professor of city and regional planning at Cornell University. “If a storm surge supersedes what the sea wall there is built for, then those residents are the ones that are actually the first ones to be hit by that much water.”
Google, along with other Moffett Park property owners, is now considering building its own levee to provide flood protection sooner than a larger project would.
Cities have little incentive to say no
Around the country, city councils like Sunnyvale’s are on the front lines of decisions that are becoming increasingly risky in a hotter climate. With control over zoning and land use, they determine who is in the path of future disasters.
Still, cities face an inherent conflict. New development is crucial for their financial health. Responding to a flood disaster, on the other hand, is often paid for by the federal government.
“It’s always the incentive of local governments to build things that bring in sales tax or property tax revenue,” Lubell says, “because that is the main financial mechanism where local governments get their funding.”
That can make it diff