Kadokawa, Tencent, and the Future of FromSoftware: What's Really Going On?

The world of gaming is in earnest trouble thanks to power moving towards the East and with increasingly greater financing and commercial power originating from Asia. Perhaps no factor plays such a prominent role in that development as the enhanced association between Tencent and Kadokawa, FromSoftware's parent company. The latest news indicate Tencent bought even more stakes in Kadokawa, setting off alarms at potential corporate intervention at FromSoftware and forthcoming undertakings.

Tencent Holdings, a Chinese multinational conglomerate with a giant technology and entertainment arm, announced on March 3 an increase in its stake in Kadokawa. The new 1.11% raises Tencent's total investment in Kadokawa to 7.97%, according to a major shareholding report filed with the Kanto Regional Financial Bureau. Tencent first invested in Kadokawa in 2021, buying a 7% stake and focusing on accessing FromSoftware's global success.

While the 1.11% rise would not have any direct impact on Kadokawa's business model, it has raised eyebrows given Tencent's growing influence. This follows Kadokawa's previous high-profile agreement with Sony, in which the Japanese firm attempted to strengthen alliances with PlayStation to counter foreign hostile bids for a takeover.

Apart from Tencent's financial forays, Kadokawa is said to be ramping up its focus on the Chinese gaming market. Kadokawa's shift in strategy was partially fueled by the phenomenal success of Black Myth: Wukong, a China-developed action-RPG that has been dominating the industry. With enormous revenue potential from China's gaming market, Kadokawa's entry into the market appears to be a calculated move.

Fanning further the rumors, FromSoftware's president, Hidetaka Miyazaki, has been recently spotted at Tencent Studios, fueling widespread speculations. No official comment as yet to decipher the nature of his visit, but Chinese media referred to it as a "friendly visit," speculating that he was only viewing Tencent's game activities in the capacity of an observer. However, given recent developments hinting at the possibility of a mobile adaptation for Elden Ring, some players in the industry infer that the visit has a bearing on developing the project.

According to Reuters, Tencent had also been working on a mobile adaptation of Elden Ring based heavily on Genshin Impact. Development of the game, however, was said to be hampered by problems with fitting FromSoftware's complicated gameplay elements into a mobile setting. Whether or not Miyazaki's visit had anything to do with this is unclear, though it is plausible given Tencent's continued collaboration with Kadokawa and FromSoftware.

Kadokawa's probable entry into the Chinese market is a symptom of a larger trend in the global gaming industry: China's rapid rise to prominence.  Recent high-profile releases from Chinese developers have been met with unprecedented success. For example, Black Myth: Wukong sold 2.5 million copies within days and reached a concurrent player peak of 2.5 million on Steam alone. The game continues to have a massive player base, demonstrating China's ability to create and sustain blockbuster games.

Other Chinese-developed games, such as Marvel Rivals (644,000 concurrent players), Mecha Break (317,000 concurrent players in open beta), and Tides of Annihilation, have demonstrated China's ability to create quality games that appeal to both Eastern and Western markets. Furthermore, Phantom Blade Zero and Wuchang: Fallen Feathers are generating a lot of buzz, and South Korean games like Stellar Blade and Lies of P have further boosted the development capabilities of the region. Monster Hunter Wilds, which was released by Capcom in Japan, recently shattered sales records by selling over 8 million copies in three days.

As all that was being done, the West's gaming community experienced mass layoffs, lost customer trust, and monetary breakdowns. Leading corporations, including BioWare, Ubisoft, and even PlayStation Studios, which is based in the US and owned by Sony, experienced dire troubles. With Tencent having a larger stake in Kadokawa and FromSoftware doing more co-operations with Chinese companies, there is the question of what this would do to FromSoftware's future games.

Tencent's increasing popularity is not going to set the creative direction for FromSoftware, given the reputation already established by the company and Miyazaki's artistic vision. However, Kadokawa's potential shift towards the Chinese market could lead to future partnerships or increased business prospects for FromSoftware in the region. It is uncertain if this will lead to more Elden Ring spin-offs, more focus on mobile adaptations, or entirely new IPs created in partnership with Chinese companies.

Tencent's growing investment in Kadokawa, Miyazaki's visit to Tencent, and the rumored Elden Ring mobile game are all signs of a broader trend in Japan's gaming industry deepening its connections with China. As the balance of power in the gaming world shifts, FromSoftware's position in this new world will be crucial to observe. As China's gaming market thrives and Western companies struggle, it's not difficult to envision more Japanese creators making the journey East in pursuit of growth and innovation. Only time will tell how this new dynamic will influence the next generation of gaming experiences.