ByteDance disbands Shanghai games studio in expansion setback

BYTEDANCE has shut down a game development studio it acquired just 3 years ago, slashing more than a hundred jobs in a major setback for its quest to challenge Tencent Holdings in mobile gaming.

TikTok's Chinese owner disbanded its 101 Studio in Shanghai this week, letting about half of the 300-plus staffers go and offering internal transfers to the rest, according to people familiar with the matter who asked not to be named discussing private information.

101 Studio had been one of a handful of key game-development houses that ByteDance had bet on to power its expansion into businesses beyond its core short-video business.

The closure marks a significant retreat from a once-booming gaming industry and the first time ByteDance has shut down a development unit altogether.

The Beijing-based firm, now labouring under severe content and licencing constraints, had previously curtailed some gaming projects. It has another gaming unit under its wing that was downsized during the months-long hiatus in new game approvals that began in the summer of 2021.

Having disrupted the world's social media landscape with TikTok and its China sibling Douyin, ByteDance sought to follow the tried-and-true path of bigger rival Tencent by building out its presence in mobile gaming.

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Games account for a huge chunk of mobile app revenues and help bring in more users for related services such as payments and social media. Tencent's ubiquitous WeChat super-app channels users to its massive gaming portfolio and helps the company benefit from in-game purchases.

ByteDance's gaming division Nuverse, which got its start in 2019, prioritises so-called hardcore or less casual games. It has grown through acquiring publishing rights and creative studios, including 101 Studio, which was born out of the takeover of Shanghai developer Mokun Technology.

Under the ByteDance umbrella, the Mokun team churned out several titles in genres like fighting and card-playing, but none made a huge splash in the US$44 billion China market dominated by twin giants Tencent and NetEase

Some 101 staffers will be transferred to Nuverse's publishing arm to work on its existing titles, said one of the people, while ByteDance is also considering letting Pico - the virtual reality headset maker it acquired last year - take over a VR game that had been under development at 101.

ByteDance did not respond to a request for comment.

ByteDance bought Mokun in March 2019 from its previous owner 37 Interactive Entertainment at a valuation of 110 million yuan (S$22.7 million). It was among a string of gaming investments the company made ahead of Beijing's antitrust and content scrutiny, including the US$4 billion takeover of Moonton Technology, whose battle arena game Mobile Legends is popular in regions like South-east Asia. But China's historic crackdown on big tech and Internet firms over the past year and a half has dented ByteDance's ambition in games while an economic slowdown stymied its core ad business.

Over the course of the past year, ByteDance has shut down most of its online tutoring operations, disbanded its venture investment team and sold off a stock-trading app - an aggressive streamlining of operations as China's tech giants resign themselves to a new era of slower growth and greater caution. Its push into casual gaming, through its Ohayoo publishing unit, also took a hit last year when the company cut some jobs and lost the division's leader. BLOOMBERG